THE scramble to save the eurozone gathered pace last night after German Chancellor Angela Merkel delivered a searing ultimatum to EU chiefs.
She warned them they had to finalise a plan to rescue Greece by Thursday. Any overall deal could include an agreement to cut Ireland's interest rate and give us extra time to repay our massive bailout loans.
This would be seen as part of a wider euro package to help improve confidence in the international money markets who are rapidly losing faith in the single currency. However, it is not clear if a deal will be hammered out.
A meeting of European leaders is scheduled for Thursday, but Ms Merkel warned that she would not attend unless there was going to be a "result". Taoiseach Enda Kenny is also expected to attend the crunch meeting.
Ms Merkel's comments heap pressure on senior European officials to finally come up with a definite plan to rescue the eurozone.
But there were strong signs last night that she faces stiff opposition from the ECB on how to resolve Greece's huge difficulties.
Last week, the crisis deepened when Italy's cost of borrowing soared to alarming levels. Italy is widely considered too large a country for the eurozone to bail out.
Mr Kenny will travel to the summit in Brussels in the hope that any solution to the Greek crisis will also help Ireland's cause.
Transport Minister Leo Varadkar yesterday said difficulties experienced by Italy in recent weeks may provide Ireland with an opportunity to get better terms on its bailout programme.
"What has happened in the last week or two . . . does create potential for Ireland," said Mr Varadkar.
While an interest-rate cut would save the Irish taxpayer relatively little each year, it would still be regarded as a symbolic victory for the Government. A longer repayment date would be more significant as it would allow Ireland to 'park' the repayment of the bailout loans while we attempt to return to borrowing on the international money market next year.
Ms Merkel stepped up calls for private bondholders to shoulder a portion of any new rescue for Greece. This would mean that private creditors would take some sort of hit on their investments.
This could involve lenders either not being repaid in full or having to wait longer for repayments or a mix of both.
But the ECB in particular is opposed to losses to private investors, or so-called bondholders. Last night the head of the ECB placed a major obstacle on the path to a new deal on a Greek bailout. He said the bank could not accept defaulted bonds as collateral for funds to keep Greece afloat.
Jean-Claude Trichet, in an interview with 'Financial Times Deutschland' today, said eurozone governments would have to come up with more ways to keep Greek banks in business than a bailout involving bondholders taking a hit.
Ms Merkel said the euro region was "trying everything we can" to avoid restructuring the country's debt -- an effective default.
"What's important is that the debt sustainability of Greece is ensured," Ms Merkel said. "The more we get private creditors involved voluntarily now, the less likely we will have to take further steps."
Ms Merkel said that she regarded an agreement on the Greek rescue as "urgently necessary", and that she had cleared her diary to attend, but she added: "I will only go if there is a result."
Ms Merkel said the new deal should ensure that Greece was capable of servicing its debts.
That meant drastic austerity measures by Athens to curb spending, additional public loans from eurozone partners, and a substantial contribution from private creditors.
Meanwhile, in an article published in a Sunday paper, the EU's economic and monetary affairs commissioner Olli Rehn called for the interest rates on Ireland's loans and the maturity of the debt to be lengthened.
"Ireland provides hard evidence that the EU/IMF conditional financial support approach is working. The efforts should be encouraged by lengthening the maturities of the loans and lowering the interest rates," he said.