International

Greece to seek eurozone loan extension

ATHENS/FRANKFURT: Greece’s leftist-led government said it would submit a request to the eurozone Thursday to extend a “loan agreement” for up to six months, raising the prospect of a last-minute agreement to keep the heavily indebted country afloat.

While European officials worked frantically with Athens to find a formula, EU paymaster Germany said no such deal was on offer and led the chorus of partners demanding that Athens must stick to the terms of its existing international bailout.

The move, confirmed by an Athens official, is an attempt by the new leftist-led government of Prime Minister Alexis Tsipras to keep a financial lifeline for an interim period while sidestepping tough austerity conditions in the EU/IMF program.

Whether the 19-nation currency bloc’s finance ministers, who rejected such ideas at a meeting Monday, accept the request as a basis to resume negotiations will depend on how it is formulated, an EU source said.

The wording has to match EU legal texts to win approval in several eurozone parliaments.

Greece 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. He said Athens had enough to repay a 1.5 billion euro installment to the IMF next month but would struggle to pay public sector salaries and pensions in April.

Hard-line German Finance Minister Wolfgang Schaeuble poured scorn on the Greek gambit, telling broadcaster ZDF Tuesday evening: “It’s not about extending a credit program but about whether this bailout program will be fulfilled, yes or no.”

However, German Economy Minister Sigmar Gabriel, leader of the Social Democratic junior partners in conservative Chancellor Angela Merkel’s coalition, welcomed what he called the signal from the Greek government that it was ready to negotiate.

With the current bailout agreement with the eurozone due to expire on Feb. 28, Tsipras said talks were at a crucial stage and his demands for an end to austerity were winning backing.

“There were protests across Europe supporting the moves made by Greece and we have managed for the first time through contacts with foreign leaders to create a positive stance on our requests,” the premier said at a meeting with President Karolos Papoulias.

EU officials said intensive consultations were underway between Athens, the Eurogroup and the European Commission, with Italy and France also involved in the search for a compromise.

Germany and other eurozone countries were standing firm on their insistence that there could be no rollback of reforms already implemented under the bailout and that Greece would have to repay all it has borrowed, they said.

European stocks rose to multiyear highs Wednesday amid rising optimism that a deal would be reached by the end of the week.

Greek government bond yields fell sharply and Spanish, Portuguese and Italian yields also dropped as fears of contagion to other peripheral eurozone countries eased.

Government spokesman Gabriel Sakellaridis confirmed that Athens would send a formal application. “We will not back down on certain points that we consider red lines. The [bailout] memorandum died on Jan. 25,” Sakellaridis told Antenna TV.

That was the day Greek voters elected a government led by Tsipras’ hard left Syriza party, which had promised to scrap the 240 billion euro bailout, reverse austerity measures and end cooperation with the hated “troika” of inspectors from the Commission, the European Central Bank and the IMF.

The ECB’s Governing Council met in Frankfurt to decide whether to continue and possibly increase emergency lending aid to Greece’s banks, plagued by deposit withdrawals.

The ECB is not expected to pull the plug this week but Germany’s Bundesbank is leading opposition to any increase in the funding by the Greek central bank, people familiar with the situation told Reuters.

Without added liquidity, the banks face a tightening squeeze as savers withdraw money that could force Greece to introduce capital controls if there is no deal.

 
A version of this article appeared in the print edition of The Daily Star on February 19, 2015, on page 6.

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