Greece requests euro zone loan extension, offers big concessions
Greece formally requested a six-month extension to its euro zone loan agreement on Thursday as it races to avoid running out of cash within weeks and overcome resistance from skeptical partners led by Germany.
With its EU/IMF bailout program due to expire in little more than a week, the government of leftist Prime Minister Alexis Tsipras urgently needs to secure a financial lifeline to keep the country afloat beyond late March.
Specifically, Athens asked for an extension to its so-called "Master Financial Assistance Facility Agreement" with the euro zone, the official told Reuters. However, Greece is proposing that the terms are different from its current bailout obligations, the official said.
Jeroen Dijsselbloem, chairman of the Eurogroup of finance ministers of the currency area, confirmed the news, tweeting: "Received Greek request for six-month extension." He gave no further details.
The request boosted hopes for a last minute compromise to avert a Greek bankruptcy and exit from the euro zone however it was not clear if the proposal would be acceptable to euro zone partners who insist Athens comply with all bailout terms.
Senior euro zone officials were due to hold a teleconference later on Thursday to discuss the Greek application. If they are satisfied, then Eurogroup finance ministers will hold a conference call on Friday to conclude an agreement, euro zone sources said.
The wording chosen could help satisfy at least some of the concerns that have held up agreement over the past two weeks, allowing Athens to avoid saying it is extending the current program that it opposes while creditors can avoid accepting a "loan agreement" without strings attached.
However, crucial details remain to be clarified on fiscal targets, labor market reforms, privatizations and other measures due to be implemented under the existing program.
Government spokesman Gabriel Sakellaridis dismissed a German newspaper report that Athens was under pressure to impose capital controls, telling Reuters that such a scenario "had no bearing on reality".
An ECB spokeswoman also denied the Frankfurter Allgemeine Zeitung report, saying there had been no discussion of capital controls at a meeting of the central bank\’s governing council on Wednesday, which slightly raised the limit on emergency lending to Greek banks.
Greek stocks rose on Thursday\’s developments, with the benchmark Athens stock index up 2 percent while banks gained 4.8 percent.
"We are doing everything to reach a mutually beneficial agreement. Our aim is to conclude this agreement soon," Sakellaridis told Skai TV earlier on Thursday. "We are trying to find common points."
EU paymaster Germany and fellow euro zone governments have so far insisted no loan deal without the full bailout conditions is on the table. Tsipras promised to ditch austerity measures imposed by the lenders when he was elected last month.
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 maneuver 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 on Friday.
"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 emergency funding controlled by the European Central Bank 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.
That was a rise of just 3.3 billion euros, less than Greece had requested. The modest increase raises the pressure for a compromise at the Eurogroup. One senior banker said it would be enough to keep Greek banks afloat only for another week if present outflow trends persist.
Finance ministers of the 19-nation currency bloc rejected Greek proposals to avoid the bailout conditions at a meeting on Monday.
German Chancellor Angela Merkel made clear on Wednesday that Greece would have to give as well as take in negotiations.
"If countries are in trouble, we show solidarity," she said in a speech to conservative supporters, naming Greece and other euro zone countries that had to take bailouts during the debt crisis. But she added, "Solidarity is not a one-way street. Solidarity and efforts by the countries themselves are two sides of the same coin. And this won’t change."