Greece prepares extension request for eurozone approval

Government officials on Wednesday worked until late finalizing a proposal to Greece’s eurozone partners which, it is hoped, will break the deadlock in negotiations, and is expected to comprise a request for an extension to the existing loan agreement.

Specifically the government is expected to seek an extension to the so-called Master Financial Assistance Facility Agreement, the official name for the European Financial Stability Facility’s loan contract. That contract stipulates, however, that the dispensation of financial assistance is dependent on Greece honoring the terms of the so-called memorandum, which contains the economic reforms that the previous government committed to and which the current SYRIZA-led coalition has contested. Indeed, former Prime Minister Antonis Samaras had made the same request in December last year when he sought to extend the European part of Greece’s bailout program, from the end of the year to February 28. Kathimerini understands that Samaras’s request had then used the words “technical extension to the existing Master Financial Assistance Facility Agreement,” the same phrase that the new government was said to be considering last night.

The compromise is expected to satisfy both sides as it would mean Athens can avoid using the phrase “extension of the existing program” and the creditors can avoid using the term “loan agreement.” In substance, however, there would be little difference from the extension sought by Samaras as the terms of the memorandum would have to be respected in order for rescue loans to be disbursed.

Once Eurogroup President Jeroen Dijsselbloem receives the Greek government’s proposal on Thursday, eurozone officials will convene at the technical level and decide whether to approve it in principle. If it is approved, a new Eurogroup summit will be called, possibly as early as Friday by teleconference, to give the final rubber stamp.

Finance Minister Yanis Varoufakis indicated on Wednesday that negotiations were “showing signs of convergence” and that he expected a deal “tomorrow or the next day.” Earlier, Varoufakis spoke by telephone with US Treasury Secretary Jack Lew with the latter underlining that failure to reach an agreement would lead to immediate hardship in Greece, that the uncertainty is not good for Europe and that time is of the essence, the Treasury said.

Officials in Brussels were said to be unimpressed on Wednesday by certain developments in Athens, notably a decision by the government to change its payment plan for tax debtors and the publication of the draft documents drawn up by Dijsselbloem and European Economic and Monetary Affairs Minister Pierre Moscovici at the previous Eurogroup summit.

The European Commission’s vice president for eurozone affairs, Valdis Dombrovskis, said efforts were under way to reach a compromise by finding “common ground for an extension of the current program.”

He insisted that “the best way forward is to extend the existing program with its conditionality.” Dombrovskis noted, however, that if Greece wants to substitute some of the existing measures in the memorandum with alternatives, it could do so.