Greece is told it needs to enact key reforms by Wednesday in order to restore trust with eurozone leaders, who will then open talks to negotiate a bailout deal with the struggling country.
Greek Prime Minister Alexis Tsipras was told he would haveto push new legislation through the Greek parliament by the 15 July for there to be any chance of the eurozone releasing immediate funds to avert state bankruptcy.
Six sweeping measures have been demanded by the 18 euro zone parties and, if Greece fails to meet these terms, it has been threatened with a “time out” from the euro.
The demands include changes to pension that would see them reduced and given later in life, widescale privatisation, trade unions powers being placed under review and VAT rising to 23 per cent.
Talks to resolve the Greek debt crisis descended into acrimonious confrontation on Saturday night, with arguments becoming so heated the meeting was ended to allow time for tempers to cool.
Negotiations are suffering from a lack of trust, Eurozone leaders said, with German Chancellor Angela Merkel telling reporters: “The most important currency has been lost and that is trust.
“That means that we will have tough discussions and there will be no agreement at any price.”
Several hardline countries had supported a German government paper which proposed that Greece take a five-year “time-out” from the Eurozone unless it accepted and implemented much tougher conditions – notably putting state assets to be privatised in an independent trust in order to pay down debt.
Read more from Economics Editor Paul Mason: Greece crisis - Europe turns the screw
Greece has received two bailouts since the crisis began, totalling €240bn – but in that time its economy has shrunk by a quarter, unemployment has soared above 25 per cent, and one in two young people is now out of work.
What is at play here is an attempt to humiliate Greece and Greeks, or to overthrow the Tsipras government. Dimitrios Papadimoulis, Syriza MP
Last month Greece defaulted on an IMF loan repayment. The next crucial date in 20 July when Greece is meant to make a bond redemption to the European Central Bank. Failure to do so would likely force the ECB to cut emergency funding to Greek banks.
The banks in Greece have been shuttered for two weeks and cash withdrawals from ATMs are being rationed.
In Greece, MPs have vented their anger at the austerity inherent in the current negotiations, despite the Greek referendum opposing tough bailout terms.
“What is at play here is an attempt to humiliate Greece and Greeks, or to overthrow the Tsipras government,” Dimitrios Papadimoulis, a Syriza member of the European Parliament, told Mega TV.
The negotiations in Brussels are to achieve an agreement to start loan negotiations with Greece. Mr Tsipras has offered to implement tax rises and spending cuts in return for a financial lifeline of €53.5bn.