Euro zone leaders: Greece must do more to earn rescue

Euro zone leaders told near-bankrupt Greece at an emergency summit on Sunday that it must restore trust by enacting key reforms before they will open talks on a new financial rescue to keep it in the European currency area.

Leftist Prime Minister Alexis Tsipras will be required to push legislation through parliament from Monday to convince his 18 partners in the monetary union to release immediate funds to avert a Greek state bankruptcy and start negotiations on a third bailout programme.

Some laws will have to be passed by Wednesday and the entire package endorsed by parliament before talks can start, one minster said.

Tsipras said on arrival in Brussels he wanted "another honest compromise" to keep Europe united.

"We can reach an agreement tonight if all parties want it," he said.

But German Chancellor Angela Merkel, whose country is the biggest contributor to euro zone bailouts, said the conditions were not yet right to start negotiations, sounding cautious in deference to mounting opposition at home to more aid for Greece.

"The most important currency has been lost and that is trust," she told reporters. "That means that we will have tough discussions and there will be no agreement at any price."

European Council President Donald Tusk cancelled a planned summit of all 28 EU leaders that would have been needed in case of a Greek exit from the single currency, and said euro zone leaders would keep talking "until we conclude talks on Greece".

Eurogroup finance ministers wrapped up a meeting broken off after nine hours of acrimonious debate on Saturday night without a firm recommendation on Greece's application for a three-year loan on the basis of reform proposals Tsipras sent on Thursday.

A Eurogroup document seen by Reuters said Greece must pass laws to change its value added tax and pension systems, reform bankruptcy rules and strengthen the independence of its statistics office before bailout talks can even begin.

Eurogroup chairman Jeroen Dijsselbloem said that while ministers had made good progress, a couple of big issues were left for the leaders to resolve.

"The Eurogroup ... came to the conclusion that there is not yet the basis to start the negotiations on a new programme," the document sent to national leaders said.

"Only subsequent to legal implementation of the above mentioned measures can negotiations on the memorandum of understanding commence, subject to national procedures having been completed," it said, in a reference to authorisation by national parliaments in countries such as Germany.

The draft said Greece needed 7 billion euros by July 20, when it must make a crucial bond redemption to the European Central Bank, and a total of 12 billion euros by mid-August when another ECB payment falls due.

It did not say how those needs would be met, and EU officials said finance ministers had been unable to agree on emergency finance.

TEMPORARY GREXIT?

Several hardline countries voiced support for a German government paper that recommended Greece take a five-year "time-out" from the euro unless it accepted and implemented swiftly much tougher conditions, notably by locking state assets to be privatised in an independent trust to pay down debt.

But French President Francois Hollande, Greece's strongest ally in the euro zone, dismissed the notion, saying it would start a dangerous unravelling of EU integration.

"There is no such thing as temporary Grexit, there is only a Grexit or no Grexit. There is Greece in the euro zone or Greece not in the euro zone. But in that case it's Europe that retreats and no longer progresses and I don't want that," he said.

Argument among finance ministers became so heated on Saturday evening that Dijsselbloem decided to adjourn at midnight and resume talks at 11 a.m. to allow tempers to cool.

The ministers agreed in principle to seek ways to make Greece's debt burden manageable by extending loan maturities and other steps stopping short of a "haircut" or writedown, provided Athens first implements reforms.