Greece seeks Plan C after Eurogroup rules out bridge loan

Euro-area governments won’t grant Greece’s request for a short-term financing agreement to keep the country afloat while it renegotiates the terms of its financial support, said Jeroen Dijsselbloem, chairman of the bloc’s finance ministers’ group.

“We don’t do” bridge loans, Dijsselbloem told reporters in The Hague on Friday, when asked about Greece’s request. “A simple extension is possible as long as they fully take over the program.”

The European Union’s latest rebuff raises the stakes for Greece’s new government, which has already failed in its demands for a debt writedown. The next showdown is scheduled for Feb. 11 in Brussels, when Greek Finance Minister Yanis Varoufakis faces his 18 euro-area counterparts in an emergency meeting after Prime Minister Alexis Tsipras delivers a major policy speech on Sunday.

“After an aggressive start, which resulted in a reality check for the new government, I think they are becoming more pragmatic,” said Aristides Hatzis, an associate professor of law and economics at the University of Athens. “No matter what they say to their internal audience, what they do abroad matters most.”

Existing bailout

Varoufakis has said his government won’t accept any more cash under the terms of Greece’s existing bailout, leaving 7 billion euros ($8 billion) of potential aid on the table, rather than complying with demands for more austerity attached to the country’s international bailout agreement.

“Practically speaking, our proposal is that there should be a bridging program between now and the end of May, which would give us space — all of us — to carry out these deliberations and in a short space of time come to an agreement” Varoufakis said after meeting German Finance Minister Wolfgang Schaeuble in Berlin on Feb. 5.

The standoff risks leaving Europe’s most-indebted state without any funding as of the end of this month, following the Jan. 25 election victory of Tsipras’s SYRIZA party.

“It will be a first step in how we want to proceed together in the next weeks, months,” Dijsselbloem said, as he cautioned that a discussion over the terms of the bailout program would mean “we no longer talk about a simple extension.”

Tsipras is preparing to set out the most detailed account yet of his plans to revive the Greek economy that aims to honor his commitments to voters without further riling his European creditors.

Tsipras, 40, on Sunday in parliament will present his legislative agenda at the start of a three-day debate leading up to a confidence vote to confirm his government. On Thursday night he was greeted by the rare sight of a pro-government demonstration in downtown Athens after he vowed to stick to his anti-bailout campaign pledges, despite their rejection by German Finance Minister Wolfgang Schaeuble.

“Tsipras is in a very delicate position,” said Dimitris Sotiropoulos, an associate professor of political science at the University of Athens. “If there are some compromises to be made and painful measures to be taken, these are urgent now that the government still has a high approval rating.”

While there’s little doubt Tsipras will win the confidence vote on Tuesday night — his coalition has 162 seats in the 300-seat chamber — attempts to persuade the rest of the euro-region to endorse his plan to restructure the country’s debt and boost spending have so far drawn a blank. Tsipras and Varoufakis, have been recalibrating their rhetoric this week after markets plunged during their first days in office.

Greek stocks have gained 11 percent this week and the yield on three-year government bonds fell 173 basis points after Tsipras’s change of tone. Still, the Athens Stock Exchange index has lost about 41 percent since its highs of last March and three-year yields have jumped to more than 17 percent from 6 percent in early December.