Renee Maltezou and Jan Strupczewski Athens and Brussels
GREECE formally requested a six-month extension to its euro zone loan agreement yesterday, offering major concessions as it raced to avoid running out of cash within weeks, but immediately ran into strong objections from EU paymaster Germany.
Berlin’s reaction was hostile, with the finance ministry describing the Greek proposal as “not a substantial solution” as it failed to fulfil conditions of an EU/International Monetary Fund bailout programme which leftist Prime Minister Alexis Tsipras had promised to ditch when he won an election last month.
Financial lifeline
With the programme due to expire in little more than a week, Athens urgently needs to secure a financial lifeline to keep the country afloat beyond late March.
Euro zone finance ministers would meet this afternoon in Brussels to consider the request, the chairman of their Eurogroup, Jeroen Dijsselbloem, said in a tweet. That raised hopes of a deal to avert possible bankruptcy and a Greek exit from the 19-nation currency area.
But such hopes soon began to fade when the German finance ministry poured cold water on the Greek request made in a letter to Dijsselbloem for an extension to its master financial assistance facility agreement with the euro zone.
Berlin has led sceptical euro zone governments in demanding that Greece keeps promises made by a previous conservative-led government to implement tough austerity policies and painful economic forms.
Finance Ministry spokesman Martin Jaeger repeated German objections to Greek plans to seek a “bridge”agreement covering funding while sidestepping austerity issues.
“The letter from Athens is not a proposal that leads to a substantial solution,” Jaeger said.
“In truth it goes in the direction of a bridge financing, without fulfilling the demands of the programme.”
In Athens, a government official said Greece was proposing different terms from its current bailout obligations.
Greece had committed to maintain fiscal balance during the interim period, take immediate reforms to fight tax evasion and corruption, and measures to deal with what Athens calls its “humanitarian crisis” and kick-start economic growth, he said.
In the document seen by Reuters, Greece pledged to meet its financial obligations to all creditors, recognise the existing EU/IMF programme as the legally binding framework and refrain from unilateral action that would undermine the fiscal targets.
Climbdown
Crucially, it accepted that the extension would be monitored by the European Commission, European Central Bank and IMF, a climbdown by Tsipras who had vowed to end co- operation with “troika” inspectors accused of inflicting deep economic and social damage on Greece.
However, the document stopped short of accepting that Greece should achieve this year a surplus on the primary budget – which excludes repayments on Greece’s huge debts – equal to 3 percent of the country’s annual economic output, as promised under the bailout deal.
Tsipras wants to cut that to 1.5 percent to allow more state spending to ease the plight of the Greek people, while the document left the issue open by speaking of attaining “appropriate primary budget surpluses”.
If Berlin’s reservations are shared among other euro zone governments, the letter’s wording may fail in its intention: to allow Athens to avoid saying it is extending the current programme that it opposes while creditors can avoid accepting a “loan agreement” without strings attached.
Greek Finance Minister Yanis Varoufakis had expressed confidence on Wednesday. “The application will be written in such a way so that it will satisfy both the Greek side and the president of the Eurogroup,” he said.
Greek stocks initially rose on yesterday’s developments, with the benchmark Athens stock index up 2 percent but slipped back after the German statement, being up just 0.6 percent on the day. Banks gained 9 percent but then shed half the gains. – Reuters