Negotiation between Greek Prime Minister Alexis Tsipras and European leaders have dragged on past a self-imposed deadline into the early hours of Monday, with talks reportedly stuck on how Greece would guarantee austerity measures in exchange for a rescue package to prevent its banks from collapsing.
According to reports, if the talks don't succeed, some of Greece's eurozone partners including Germany have warned, the country could be temporarily forced from the euro, the European single currency that Greece has been a part of since 2002.
No country has ever left the joint currency, which launched in 1999 and there is no mechanism in place for one to do so.
It was not clear what a temporary exit or "Grexit" would entail, but the threat put intense pressure on Tsipras to swallow politically unpalatable austerity measures, as his people overwhelmingly want to stay in the eurozone.
Reports said the French and the Italians had said the idea of a Grexit "should not be on the table".
The leaders are discussing Greece's request for a three-year, 53.5bn-euro ($59.5bn) financial package. But other leaders in Brussels say Greece needs even more funding and are demanding tough austerity measures in exchange. It would be Greece's third bailout in five years.
Several officials said that the terms of the austerity package and the timing of its implementation remained serious obstacles.
One source said the main difference centred on when the European Central Bank could start to increase its emergency liquidity assistance to Greek banks. Greece shut its banks two weeks ago and has limited the amount people can withdraw from their accounts. Without more liquidity from the ECB, the banks can't reopen without collapsing.
Officilas said sticking points included a proposal for Greece to transfer billions of euros worth of state assets to an independent fund in Luxembourg under European supervision. The Greek government is loath to do so.
The 19 leaders of the eurozone countries went into talks Sunday at mid-afternoon and vowed not to emerge without something concrete. They were presented with a set of proposals from the eurozone's top official, Jeroen Dijsselbloem, who said the sides have "come a long way" in two days of talks among finance ministers.
The deal on the table appeared to include commitments from Tsipras to push a drastic austerity program including pension, market and privatisation reforms through parliament by Wednesday, and from the 18 other eurozone leaders to start talks on a new bailout program.
A correspondent in Brussels said there was a suggestion that these provisions would have to be finalised in the parliament within 72 hours."We're talking about a massive restructuring and indeed, it might not be possible at all."
A four-page discussion paper put to eurozone leaders and obtained by the Associated Press spoke of a potential "time-out from the euro area" for Greece if no agreement could be found.
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| No country has ever left the joint currency, which launched in 1999 and there is no mechanism in place for one to do so |
"The most important currency has been lost: that is trust and reliability," German Chancellor Angela Merkel said on Sunday.
Tsipras insisted his government was ready to clinch a deal.
"We owe that to the peoples of Europe who want Europe united and not divided," he said. "We can reach an agreement tonight if all parties want it."
Divisions appeared to be growing among European leaders.
French President Francois Hollande insisted it was vital to keep Greece in the euro and said in the event of a departure, "it's Europe that would go backward. And that I do not want."
On the other side, Finnish Finance Minister Alexander Stubb said the leaders should talk with Greece about a third bailout only if it passed its austerity measures in parliament.
Traditionally, eurozone ministers agree by mutual consensus, though in exceptional circumstances a unanimous vote may not be needed.
"After last week's referendum there were crowds of jubilant voters, this evening there were several hundred protesters from the extreme left, there were riot police present but even they drifted away after a few hours," he said.
"Assuming Tsipras gets back with a deal in his hand it's going to be a very hard thing to sell to a very sceptical Greek public.
"It seems he is dealing with a very much worse set of proposals."
Greece has received two previous bailouts totalling 240bn euros ($268bn), in return for deep spending cuts, tax increases and reforms from successive governments.
Although the country's annual budget deficit has come down dramatically, Greece's debt burden has increased to 320bn euros as its economy has shrunk by a quarter.
