Germany rejects Greece request for bailout extension

The German finance ministry rejected a new request from Athens on Thursday for an extension of its bailout programme, saying it fell short of the conditions set out earlier this week by Greece’s euro-zone partners.

“The letter from Athens is not a proposal that leads to a substantial solution,” said the ministry spokesman, Martin Jaeger. “In truth it goes in the direction of bridge financing, without fulfilling the demands of the programme. The letter does not meet the criteria agreed by the Eurogroup on Monday.”

In a race to avoid running out of cash, the Greek finance minister, Yanis Varoufakis, sent a letter to the Eurogroup chief, Jeroen Dijsselbloem, on Wednesday requesting a six-month extension of a euro-zone loan agreement.

It was not immediately clear what Germany objected to in the letter, and the ministry declined to comment further. But there were a number of differences between the Eurogroup proposal rejected by Mr Varoufakis on Monday and his new letter.

Among them, the letter specified that fiscal targets for this year should “take into account the present economic situation”.

The letter also says Greece plans to introduce “substantive, far-reaching reforms” designed to restore the living standards of Greek citizens. Some of the details in the original Eurogroup text, including a Greek commitment to work with the so-called troika of lenders on labour and pension reforms, are missing.

One euro-zone source said the German rejection should be seen as a tactical measure to put more pressure on Greece, rather than an outright rejection of its proposals.

Another said: “It seems that Berlin had seen a draft and agreed to it, and the letter sent differs from the draft when it comes to fiscal questions – I do not know exactly at what points.”

With its EU/IMF bailout programme due to expire in little more than a week, the government of the leftist prime minister, Alexis Tsipras, urgently needs to secure a financial lifeline to keep the country afloat beyond late March.

Euro-zone finance ministers were to meet today in Brussels to consider the request, Mr Dijsselbloem, had tweeted before Germany’s response.

That had raised hopes of a deal to avert possible bankruptcy and a Greek exit from the 19-country currency zone.

The EU paymaster Germany and its fellow euro-zone governments have so far insisted on no loan deal without the full bailout conditions is on the table. Mr Tsipras promised to ditch austerity measures imposed by the lenders when he was elected last month.

The German finance minister, Wolfgang Schaeuble, has poured scorn on suggestions that Athens could negotiate an extension of euro-zone funding without making any promises to push on with budget cuts and economic reforms.

But on Wednesday he indicated there may be some possibility of a compromise. “Our room for manoeuvring is limited,” he said during a debate in Berlin, adding, “We must keep in mind that we have a huge responsibility to keep Europe stable.”

Greek Finance Minister Yanis Varoufakis expressed confidence on Wednesday that euro zone finance ministers would approve the Athens government’s proposal. “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.

Greece’s finances are in peril. It is burning through its cash reserves and could run out of money by the end of March without fresh funds, a person familiar with the figures said.

Likewise its banks are dependent on the emergency funding controlled by the ECB in order to pay out depositors who have been withdrawing their cash. The ECB agreed on Wednesday to raise a cap on funding available under its Emergency Liquidity Assistance scheme to 68.3 billion euros (US$78 billion), a person familiar with the ECB talks said.

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