BRUSSELS: Europe and Greece battle on Friday to reach a last-minute bailout compromise with powerhouse Germany adamant that Athens accept further austerity in return for more aid.
Finance ministers from the 19-member eurozone meet in Brussels later 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.
Powerful Germany firmly dismissed the request by Athens for a six-month extension to its EU loan program, pouring doubt on whether the different sides can find a quick solution to an increasingly embittered debt row and avoid a catastrophic exit by Greece from the euro.
A spokesman for German Finance Minister Wolfgang Schaeuble slammed the request as “not a substantial proposal for a solution.”
But taking a more conciliatory stance, Germany’s Vice Chancellor Sigmar Gabriel, a center-left Social Democrat, said the request, although insufficient, should be seen as “a first step.”
The United States pressed the EU and Greece to reach agreement, stressing it would require “vigorous engagement from both sides.”
“The message to Germany is broadly parallel to the one to Greece and others in Europe . . . it’s important for the euro and the global economy to reach agreement,” said a senior US Treasury official, speaking to reporters on Thursday on condition of anonymity.
“The Europeans have the capacity to handle these challenges,” the official said on the eve of the finance ministers meeting in Brussels.
The meeting 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.
“All the necessary conditions are there for a mutually beneficial, workable transition deal, and I believe this will be the result of the Eurogroup,” Deputy Greek Prime Minister Giannis Dragasakis said late on Thursday.
A top European official said the standoff had come down to a clash of personalities with 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.
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’s finances through two bailouts.
But Berlin quickly shot it down, slamming the Greek request as far short of what was necessary only moments after the European Union had hailed it as a step in the right direction.
‘Accept or reject’
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.
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 will be key, with Greece’s ruling Syriza party saying it is only requesting an extension to the loan part of the 240-billion-euro ($270-billion) 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.
‘Eurozone more stable’
Optimistic, the European Commission believed 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 boosted the amount of emergency liquidity available to Greece’s vulnerable banks, though it was less than expected.
As the clock ticked down to a Friday deadline set by Eurogroup head Jeroen Dijsselbloem, world 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 was 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.