Germany balks at Greek extension

GREECE formally requested a six-month extension to its eurozone loan agreement yesterday, offering major concessions as it raced to avoid running out of cash within weeks, but immediately ran into strong objections from European Union 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 a European Union-International Monetary Fund (EU/IMF) bailout programme that leftist Prime Minister Alexis Tsipras promised to ditch when he won an election last month.

With the programme due to expire in little more than a week, Athens urgently needs a financial lifeline to keep the country afloat beyond late March.

Eurozone finance ministers would meet today in Brussels to consider the request, the chairman of their Eurogroup, Jeroen Dijsselbloem, said in a tweet.

That raised hope for 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 Mr Dijsselbloem, for an extension to its “Master Financial Assistance Facility Agreement” with the eurozone.

Berlin has led sceptical eurozone governments in demanding 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” deal covering funding while sidestepping austerity issues. “The letter from Athens is not a proposal that leads to a substantial solution,” Mr Jaeger said.

“In truth it goes in the direction of a bridge financing, without fulfilling the demands of the programme.” It did not meet the criteria agreed by the Eurogroup of eurozone finance ministers on Monday, he said.

In Athens, a government official said Greece was proposing different terms from its current bail-out 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 kickstart economic growth, he said.

In the document seen by Reuters, Greece pledged to meet financial obligations to all creditors, recognise the existing EUIMF programme as the legally binding framework and refrain from unilateral action that would undermine the fiscal targets.

Crucially, it accepted that the extension would be monitored by the European Commission, European Central Bank and IMF, a climb-down by Mr Tsipras, who had vowed to end co-operation with the “troika” Greece accuses of inflicting deep economic and social damage.

The document stopped short of accepting a budget surplus target of 3% of annual economic output for this year, as promised under the bail-out deal.