BRUSSELS: Germany rejected a take-it or leave-it request by Athens Thursday for a six-month extension to its EU loan programme, but both sides indicated later that there was still hope for a solution.
In a sign that a deal could be salvaged, German Chancellor Angela Merkel held talks with Greek Prime Minister Alexis Tsipras by telephone for nearly an hour on Thursday in a “positive climate,” a Greek government source said.
Tsipras also spoke by phone with French President Francois Hollande, who said he would raise the Greek issue in his meeting with Merkel on Friday, the source said.
Finance ministers from the 19-member eurozone will hold a crunch meeting in Brussels on Friday to consider the proposal by Athens to extend its European loan programme that expires at the end of the month.
Greece’s new radical left government, in office since elections late January, is asking for a loan extension with no strings attached, as it continues to refuse to implement austerity reforms agreed by previous governments with international lenders in return for a 240-billion-euro ($270-billion) bailout.
Key EU powerhouse Germany initially shot the Greek plan down, slamming the 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.
However, German vice chancellor Sigmar Gabriel said later that while the proposal fell short, “it must be used as a starting point for negotiations.”
Friday’s high-stakes Eurogroup meeting will be the third in a little over a week by the single currency bloc’s finance ministers to reach a compromise with Greece after previous talks ended acrimoniously.
A top European official said the stand-off had come down to a clash of personalities with Germany’s Schaeuble 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.
Along with its formal request for a loan extension Thursday, Greece offered major concessions, including a return, if not in name, of the hated ‘troika’ mission of creditors that has overseen Athens’ finances over the last few years.
Faced with the German refusal, Athens said its request was final.
“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 it is satisfying the demands of its euro-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 multi-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 programme.
In substance, the two sides are not that far apart, with Tsipras willing to press on with reforms, if different from those embraced by previous conservative governments.
In return, the new premier is demanding the eurozone agree to short-term funding to buy the time needed to hammer out a new rescue deal.
The European Commission, the EU’s executive arm, seemed optimistic, believing that the Greek request could “pave the way” for a difficult compromise, a spokesman said.
With the major European portion of the bailout about to expire, 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 Eurogroup head Jeroen Dijsselbloem, Europe’s stock markets mainly rose, with Frankfurt hitting a new record close over hopes of a resolution to the Greek row.
A report by ratings agency Standard & Poor’s meanwhile 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.