ATHENS/FRANKFURT (Reuters) – Greece will submit a request to the euro zone on Wednesday to extend a “loan agreement” for up to six months but EU paymaster Germany says no such deal is on offer and Athens must stick to the terms of its existing international bailout.
The move, confirmed by an official spokesman, is an attempt by the new leftist-led government of Prime Minister Alexis Tsipras to keep a financial lifeline for an interim period while avoiding tough austerity conditions in the EU/IMF programme.
But it was unclear whether finance ministers of the 19-nation currency bloc, who rejected such ideas at a meeting on Monday, would accept the application as a basis to resume negotiations. A spokesman for the Eurogroup said no request had been received so far.
Hardline German Finance Minister Wolfgang Schaeuble dismissed the Greek gambit, telling broadcaster ZDF on Tuesday evening: “It’s not about extending a credit programme but about whether this bailout programme will be fulfilled, yes or no.”
Greek bond yields fell sharply and shares rallied after government spokesman Gabriel Sakellaridis confirmed Athens would send a formal application on Wednesday. “Let’s wait today for the request for an extension of the loan agreement to be submitted by Finance Minister (Yanis) Varoufakis,” he told Antenna TV.
Behind-the-scenes talks were continuing to seek common ground and Greece believed it was on the right path, he said.
“We are coming to the table to find a solution,” the spokesman said. “We will not back down on certain points that we consider red lines. The (bailout) memorandum died on Jan 25.”
That was the day Greek voters elected a government led by Tsipras’s hard left Syriza party, which had promised to scrap the 240 billion euro bailout, reverse austerity measures and end cooperation with the hated “troika” of inspectors from the European Commission, the European Central Bank and the IMF.
The ECB’s governing council will meet later on Wednesday in Frankfurt to decide whether to continue and possibly increase emergency lending assistance to Greece’s banks, plagued by deposit withdrawals. The ECB is not expected to pull the plug this week but Germany’s Bundesbank is leading opposition to any increase in the funding by the Greek central bank, people familiar with the situation told Reuters.
Without added liquidity, the banks face a tightening squeeze as savers withdraw money that could force Greece to introduce capital controls if there is no deal. A source close to the Greek government said the loan extension request would be based on a draft text drawn up earlier this week by EU Economics Commissioner Pierre Moscovici, which was discarded by euro zone finance ministers when they met on Monday.
The Moscovici draft leaked to reporters would also have committed Greece not to take unilateral steps to reverse measures implemented under the bailout, but Tsipras told Syriza lawmakers on Tuesday he would hasten legislation to scrap labour market deregulation.