Eurozone ministers battled Tuesday to resolve a dilemma over how to twist banks' arms into "voluntarily" contributing to a second Greece bailout and so avoid a damaging debt default.
The latest, 105-billion-euro-plus attempt to rescue Greece's finances hinges on to what extent banks, pension funds and insurers can be forced to accept new terms on old debts before getting their money back from Athens.
Greece has accumulated some 350 billion euros ($500 billion) of debt, more than its entire economy produces in 18 months, and the European Central Bank (ECB) fears that forcing private investors to help out could see the credit ratings agencies deem Athens to be in default, a huge risk for the eurozone.
Standard & Poor's late on Monday slashed Greece's credit rating to the lowest in the world, virtually default status -- sending the yield on 10-year Greek bonds spinning to a record high of 17.175 percent as the talks began.
German Finance Minister Wolfgang Schaeuble insisted that taxpayers in the eurozone's biggest economy will loan Greece more money but only if the banks and other private creditors take their own hits too.
"The German government is ready to participate in supplementary measures," Schaeuble said, but in that, "of course, a role for the private sector is an element ... We are in discussions."
Echoing this hardline stance, Austrian Finance Minister Maria Fekter said "we can't leave the profits in the hands of the banks and the losses in the hands of taxpayers."
But striking to the heart of the matter, she said she was "having a hard time imagining" that banks would join the rescue on a purely voluntary basis.
Asked during a parliamentary debate whether the private sector should contribute between 20 and 30 percent of the second bailout, Dutch Finance Minister Jan Kees de Jager said "it will be more," according to a spokesman.
In depth: Greek rescue options, from debt restructuring to rollover
The politicians want the banks -- some of whom were previously bailed out by taxpayers -- to contribute to the latest rescue plan so as to appease voters.
Barely a year after a 110-billion-euro first bailout, Belgian Finance Minister Didier Reynders at the weekend pegged the figures now needed at "more than 80 billion euros," with an additional 25 billion euros from the private sector.
The chairman of the 17-nation currency Eurogroup, Luxembourg Prime Minister Jean-Claude Juncker, said ministers had come together in Brussels "to examine different options ... all the options."
While nothing would be set in stone, they wanted to "get closer to a solution" before Eurogroup talks in Luxembourg on Monday, one that would avoid a Greek bankruptcy that threatens to tear apart the entire eurozone.
EU economy commissioner Olli Rehn told German daily Sueddeutsche Zeitung meanwhile that the European Commission is working on a plan which would see banks agree to "hold onto their bonds for longer and on a voluntary basis."
Reynders, often a reliable guide to negotiations throughout a debt crisis that has also seen Ireland and Portugal need bailouts, said banks had to "maintain their exposure to Greek debt over the next few years."
But he added that unless the ECB was satisfied, any solution also involving the International Monetary Fund, accelerated Greek economic reforms and the sell-off of state assets by Athens, would simply "go against the grain."
The ECB is sitting on a pile of Greek debt and it fears that any "rescheduling" could unleash "a credit event" or de facto default which would cost it, the banks, and ultimately the eurozone, billions more to put right.
Incoming ECB chief, Italy's Mario Draghi, told a European Parliament confirmation hearing on Tuesday: "We know how to manage the bankruptcy of a company, we have just learned -- and I am not sure learned completely -- how to manage the default of a bank ... We haven't yet learned how to manage a sovereign default."