EU powers clash over Greece as euro exit looms

Brussels (AFP) - Divided eurozone leaders clashed over the fate of Greece on Sunday with a catastrophic exit from the single currency looming large as they struggled to reach a bailout deal with debt-hit Athens.

Germany's fiscal hawks faced off against doves led by France at a summit of the 19 eurozone leaders in Brussels, with Athens facing demands to push through new reform laws next week.

Despite the fact Greece's banks could run dry soon, an emergency summit of all 28 EU leaders billed as the last chance to keep the country in the euro was called off due to slow progress.

Greece's leftist Prime Minister Alexis Tsipras insisted a deal was possible on Sunday night "if all parties want it", adding that he was ready for an "honest compromise".

But German Chancellor Angela Merkel took a tough line as usual, echoing her usual position and that of several mainly newer eastern European euro members.

"There will be no agreement at any price," Merkel told reporters, complaining of a loss of trust in Athens and warning of "tough negotiations" ahead.

French President Francois Hollande, whose country has been the most supportive of Athens during the six-month standoff, meanwhile said Paris would do "everything" to keep Greece in the euro.

In a sign of the growing tensions between the eurozone's two biggest economies and political forces, Hollande also ruled out a German proposal for a "temporary Grexit" from the single currency.

- New laws this week -

The meeting came after the Eurogroup of eurozone finance ministers finished two days of intense talks on Greece's proposals for reforms in exchange for a three-year bailout worth 80 billion euros ($89 billion).

They agreed Greece would have to push through new laws by Wednesday under the conditions agreed by the eurozone ministers, Finnish Finance Minister Alex Stubb said afterwards.

Athens would also have to introduce tough conditions on labour reform and pensions, VAT and taxes, and measures on privatisation, he said.

"We have come a long way but a couple of big issues are still open," Eurogroup chief Jeroen Dijsselbloem said. "We are going to put those to the leaders so it's up to them."

Greece and its creditors have been at odds since Tsipras was elected in January on a vow to end five years of bitter austerity under two bailouts since 2010 worth 240 billion euros.

Tension turned to anger last month after Tsipras called a referendum on the bailout terms, in which Greeks overwhelmingly rejected the creditors' demands.

Greece's parliament approved fresh proposals by the government in Athens in the early hours of Saturday, despite the fact they were largely similar to many of those rejected in the referendum.

In Greece, there is growing alarm at capital controls that have closed banks and rationed cash at ATMs for nearly two weeks, leading to fears that food and medicine will soon run short.

Economy Minister Giorgos Stathakis warned the restrictions will likely stay in place for "months" even if there is a deal.

- Razor's edge -

Greek newspapers expressed alarm, with the headline of the Eleftheros Typos in Athens saying: "The future of Greece on a razor's edge" and asking "what will happen in the case of the nightmare of a Grexit?"

The European Central Bank is providing emergency liquidity to keep Greek banks afloat but has frozen the limit, with fears that failure to reach a deal could cause it to shut off the taps completely.

Fears are mounting meanwhile that the results of Friday's parliamentary vote in Athens could have critically weakened the Greek government's ability to quickly legislate on the reforms as demanded by the eurozone.

Tsipras won the backing of 251 out of 300 deputies in the Greek parliament for his reform plans, even though they are similar to the ones that Greeks rejected in last week's referendum.

But three senior government figures were among 10 MPs who abstained or voted against, and several others from the ruling leftist Syriza party stayed away, prompting commentators to predict a government shake-up.

Greece's debt is now worth nearly 180 percent of the country's GDP and on June 30 it became the first advanced economy to default on a payment to the International Monetary Fund.

"We don't sleep, everybody's worried," a Greek pensioner said, watching with concern the events taking place in Brussels several thousand kilometres (miles) away.

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