Germany rejected a request by Athens Thursday for a six-month extension to its EU loan program, denting hopes that Europe and Greece can find a quick solution to a bitter debt row.
Eurogroup head Jeroen Dijsselbloem said finance ministers from the 19-member eurozone would meet in Brussels Friday to consider a take-it or leave-it proposal by Athens to extend its European loan program that expires at the end of the month.
But key powerhouse Germany quickly shot it down, slamming the Greek request as “not a substantial proposal for a solution” only moments after the European Union had hailed it as a step in the right direction.
“The letter does not meet the criteria agreed upon in the Eurogroup on Monday,” said a spokesman for German Finance Minister Wolfgang Schaeuble.
The meeting on Friday will be the third in a little over a week by the single currency bloc’s finance ministers to reach a compromise with the new leftist government in Greece after previous talks ended in chaos and recrimination.
A top European official said the stand-off had come down to a clash of personalities with Germany’s Schaeuble, the euro’s most powerful defender, furious at the negotiating style of his Greek counterpart, the casual and fast-talking Yanis Varoufakis.
“There is a real problem of personalities and I understand that. Schaeuble is outraged by comments made by Varoufakis,” the official said.
Greece made a formal request for a loan extension Thursday, offering major concessions including a return, if not in name, of the hated ‘troika’ mission of creditors that has overseen Athens finances through two bailouts.
Faced with the German refusal, Athens said its request was final and eurozone finance ministers would have to take it or leave it.
“Tomorrow’s Eurogroup has just two choices. To accept or reject the Greek request,” a government source said after the German snub.
“We will now discover who wants to find a solution, and who does not,” the official added.
Greece insists the request satisfies the demands of its partners, while also keeping a promise to end the detested austerity conditions in the bailout which it says have destroyed the economy.
“The government… is not asking for an extension to the memorandum,” an official source in Athens said, referring to the reform agreement between Greece and the troika — the EU, European Central Bank and International Monetary Fund creditors.
Wording is key to resolve the feud, with Greece’s ruling SYRIZA party saying it is only requesting an extension to the loan part of the 240-billion-euro rescue that came with commitments to push through austerity and deep reforms.
However, key eurozone partners, led by Germany, say the distinction is unacceptable, insisting that any extension include the austerity commitments of the full program.
In substance, the two sides are not that far apart, with new Greek Prime Minister Alexis Tsipras willing to press on with reforms, if different from those embraced by previous conservative governments.
In return, Tsipras is demanding that the eurozone agree to short-term funding to buy the time needed to hammer out a new rescue deal, something the requested extension would provide.
Germany has rejected this option calling Thursday’s extension request nothing more than “bridge financing, without meeting the requirements of the program.”
Meanwhile the European Commission, the EUs executive arm, seemed optimistic, believing that the Greek request could “pave the way” for a difficult compromise, a spokesman said.
With the European portion of the bailout expiring, Greece’s creditors insist it needs extra financing to stave off default and an exit from the euro.
Providing much needed breathing room to Athens, the ECB decided Wednesday to increase the amount of emergency liquidity available to Greece’s vulnerable banks.
The increase was weaker than expected, however, and seen by analysts as a warning by the ECB that Athens accept a deal as soon as possible.
As the clock ticked down to a Friday deadline set by Dijsselbloem, European markets held their cool and were little changed.
A report by ratings agency Standard & Poor’s said the risk of financial chaos spreading in the event of a Greek exit from the eurozone is limited and lower than during the 2012 “Grexit” scare.
“The eurozone is certainly more stable and stronger than five years ago, and a hypothetical chance of a member leaving should have little effect,” said Estonian Finance Minister Maris Lauri. [AFP]