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Greece is set for a bleak reality check as it pushes for debt deal

Germany's Chancellor Angela Merkel And France's President Francois Hollande Meet To Access Greek SituationGermany's Chancellor Angela Merkel And France's President Francois Hollande Meet To Access Greek Situation
The German for "Oxi" is "Nein."Photograph by Christophe Morin — Bloomberg via Getty Images

Greece’s efforts to get a good part of its debts written off are set for a big reality check later Tuesday, as leaders from around the Eurozone descend on Brussels for yet another emergency summit to decide on what to do next.

The runes don’t look good after German Chancellor Angela Merkel late Monday challenged her Greek counterpart Alexis Tsipras his latest request for a new bailout wasn’t acceptable.

“The conditions for the start of talks over a concrete…program aren’t in place at this time,” Merkel told reporters after an evening of talks with French President Francois Hollande (watch in German here or French here).

It isn’t clear what Tsipras can do to secure more aid, given that Greeks voted so emphatically against accepting the austerity and reforms that the creditors have always insisted on, and given that the rest of the Eurozone remains set firmly against writing off the country’s debts. He’d replaced his feisty finance minister Yanis Varoufakis Monday in an effort to rebuild bridges (Varoufakis had referred to his counterparts as “terrorists” and said he would “wear their loathing with pride”), but the new minister, Euclid Tsakalotos, is every bit as much a traditional left-winger as his predecessor.

Earlier Monday, the European Central Bank had taken the largely symbolic step of asking Greece’s banks to post more collateral against €89 billion in emergency ECB loans that they have needed to meet a massive run by depositors.

The move doesn’t have an immediate impact because the key issue here is the absolute level of the loans. The ECB again refused a request for additional ‘Emergency Lending Assistance’ Monday, as it did last week. That means that it’s no longer sending money to Greek banks to help them restock ATMs that have been emptied by panicking depositors.

The banks have been closed and subjected to capital controls since last Monday, and are limiting daily withdrawals at ATMs to no more than €60 ($65). Some banks have imposed even lower limits.

“The ECB’s decision to increase the haircut on collateral Greek banks need to access ELA was a clear sign that the Eurozone is gradually tightening the thumbscrews,” said ING-Diba economist Carsten Brzeski.

Eurozone heads of government are due to arrive in Brussels from 1100 Eastern Time onwards for a summit that starts officially at 1200 ET. The groundwork for their meeting will be laid by their respective finance ministers, who are arriving at 0600 ET.