ATHENS: The loan extension request that Greek made for giving it some more time to clear off its debt has been discarded by Germany as it said that it fell short of conditions expected by the rest of the euro zone.
The shock announcement from Berlin came just hours after Greece filed a formal request to its euro zone partners to extend its loan agreement, in the hope of averting a cash crisis.
Euro zone ministers are due to meet on Friday in an attempt to hammer out a deal. It will be their third attempt in 10 days to resolve a standoff that has sent jitters across the continent at the prospect of a messy Greek exit from the single currency.
The European commission had described the Greek proposal – widely seen as a climb-down on some of Greece’s key demands – as a positive sign that could pave the way for compromise.
But Germany said the Greek plan failed to meet euro zone ministers’ demands that Greece stick to its bailout program – a set of demands laid out on Monday at an acrimonious meeting in Brussels that failed to end the deadlock.
“The letter from Athens is not a proposal that leads to a substantial solution,” finance ministry spokesman Martin Jaeger said in a statement.
“In truth it goes in the direction of a bridge financing, without fulfilling the demands of the program. The letter does not meet the criteria agreed by the Euro group on Monday.”
A Greek government official said its latest proposal included measures to deal with the country’s “humanitarian crisis” and kick start the economy. The request for a six-month loan extension would give Greece room to negotiate a new deal for growth with its euro zone partners, the official said.
But the request was seen as a climb-down by the Greek government to the demands of its euro zone creditors.
In a letter to Jeroen Dijsselbloem, president of the euro zone finance ministers’ group, obtained by Reuters, Greece’s finance minister, Yanis Varoufakis, conceded that the Greek authorities would “refrain from unilateral action that would undermine the fiscal targets, economic recovery and financial stability”.
Crucially, he said Greece would remain under the supervision of the European commission, the European Central Bank and International Monetary Fund – the unpopular troika that the Syriza-led government had insisted it would throw off.
Aides to the Greek Prime Minister, Alexis Tsipras, insisted that the loan request respected the popular will of the Greek people.
Calling it an “interim agreement,” well-placed insiders said the request was significant in two important domains: it raised the issue of debt restructuring and included a pledge from the new government to keep to a balanced budget.
