Greece seeks new EU loan deal in race to avert collapse

Members of the European Parliament with posters with the word "No" (Oxi in Greek) attend a debate on Greece at the European Parliament in Strasbourg, France, July 8, 2015. [Photo/Agencies]

EMERGENCY FINANCE

The aim is for Eurogroup ministers meeting on Saturday to be in a position to recommend a loan, and some emergency bridging finance, which a full summit of the 28 EU leaders would approve on Sunday if they are satisfied with Greek reform commitments.

That is a big 'if', both due to Athens' chequered record and because many of the liberalisation measures required run counter to the leftist ideology of Tsipras' Syriza party.

The prime minister promised to deliver detailed reform plans on Thursday and avoided the angry rhetoric that has alienated many European partners. He did however criticise attempts to "terrorise" Greeks into voting for "never-ending austerity".

The European Central Bank kept Greece's banks on a tight leash, holding a freeze on emergency funding that means they could soon run out of cash. The Greek government said banks would remain closed until July 13, with an ATM withdrawal limit unchanged at 60 euros per day.

European Council President Donald Tusk reiterated that the final deadline for Greece to submit convincing reform plans and start implementing them was this week.

"Our inability to find an agreement may lead to the bankruptcy of Greece and the insolvency of its banking system," Tusk told EU lawmakers. "And for sure it will be most painful for the Greek people.

"I have no doubt that this will affect Europe, also in the geopolitical sense. If someone has any illusion that it will not, they are naive," he said.

In the turbulent chamber, some lawmakers held up "Oxi" (No) signs to back Greek voters' rejection of more austerity, while far-right speakers praised the radical leftist government for standing up to what several called the European "oligarchy".

Euro zone officials want Greece to rush a first wave of measures through parliament before Sunday to prove its serious intent. German Chancellor Angela Merkel has said she would ask parliament in Berlin to authorise the opening of loan negotiations if the Greek measures are deemed satisfactory.

Merkel made clear earlier that she was "not exaggeratedly optimistic" that a deal could be found to save Greece by Sunday.

Euro zone sources said one key question was whether the package will be more ambitious than the spending cuts, tax increases and modest reforms that Greek voters rejected on Sunday in a referendum on a previous bailout plan.

"The numbers have to add up, and the numbers have become vastly more unfavourable since the banks were shut and the economy seized up in the last 10 days," one euro zone finance official said.

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