A race to save Greece from bankruptcy and keep it in the euro gathered pace on Wednesday when Athens formally applied for a three-year loan and European authorities launched an accelerated review of the request.
Greek Prime Minister Alexis Tsipras called in a speech to the European Parliament for a fair deal, acknowledging Greece's historic responsibility for its plight, after EU leaders gave him five days to come up with convincing reforms.
The government submitted a request to the European Stability Mechanism bailout fund to lend an unspecified amount "to meet Greece's debt obligations and to ensure stability of the financial system". It promised to begin implementing tax and pension measures sought by creditors as early as Monday.
With its banks closed, cash withdrawals rationed and the economy in freefall, Greece has never been closer to a state bankruptcy that would probably force it to leave the euro and print an alternative currency.
European officials told Reuters that some Greek banks may have to be shut and taken over by stronger rivals, regardless of whether the country bailout funds or not.
Yet leftist premier Tsipras seemed almost nonchalant, albeit with a note of humility, when he appeared before EU lawmakers in Strasbourg to cheers and scattered boos.
Speaking hours after euro zone leaders, at another emergency summit in Brussels, set Greece a deadline of the end of the week to come up with far-reaching reform proposals, Tsipras said Greeks had no choice but to demand a way out of "this impasse".
"We are determined not to have a clash with Europe but to tackle head-on the establishment in our own country and to change the mindset which will take us and the euro zone down," he said to applause from the left. But he gave scant details of his reform plans, frustrating many lawmakers.
The head of the Eurogroup of finance ministers of the 19-nation currency area, Jeroen Dijsselbloem, asked the European Commission and the European Central Bank to evaluate the loan request, assess Greek debt sustainability and study whether Greece poses a risk to the financial stability of the euro zone.
IMF chief Christine Lagarde reiterated that Greece's massive debt would need restructuring, something Germany is resisting. "Greece is in a situation of acute crisis, which needs to be addressed seriously and promptly," she said at the Brookings Institution think-tank in Washington.
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 liberalization 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 criticize 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.
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 authorize 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 unfavorable since the banks were shut and the economy seized up in the last 10 days," one euro zone finance official said.
Admission of impotence
France, which has tried to mediate between Athens and Berlin, nailed its colours to the mast on Wednesday, warning of the perils of a "Grexit".
Socialist Prime Minister Manuel Valls told parliament in Paris: "Keeping Greece in the euro and therefore in the heart of Europe and the EU is something of the utmost geostrategic and geopolitical importance." To let Greece go would be "an admission of impotence", he added.
Despite the last-minute efforts to conjure up a deal, a Reuters poll of economists found the probability of Greece leaving the euro zone had risen to 55 percent from 45 percent last week, the first time it was deemed more likely than not.
Tsipras admitted that after winning power on a promise to end austerity, his government had "spent more time negotiating than governing" but he disappointed those who had hoped to hear concrete immediate measures to transform the shattered economy.
Having secured a referendum victory and the unprecedented support of the five main parties in parliament, Tsipras also made clear he wanted to act fast to pre-empt any possible revolt against the painful concessions he will need to make.
He was strongly critical of Greece's failings as a society, citing a history of clientelism, corruption, tax evasion that had "run riot", inequality and "the nexus of political and economic power".
While Athens has made strides since 2010 in turning around its public finances to post a budget surplus before debt service, it has lagged on
implementing structural reforms.
In particular, it has fallen far short of targets on privatizing state assets and struggled to improve tax collection and reform labour laws and a costly pension system.
Centrist EU lawmaker Sylvie Goulard told Tsipras: "In the words of a well known advertising slogan, 'Just do it!'"