Germany holds up Greek bid for euro zone loan extension

ATHENS/BRUSSELS, (Reuters) – Germany rejected a Greek proposal for a six-month extension to its euro zone loan agreement yesterday, saying it was “not a substantial solution” because it did not commit Athens to stick to the conditions of its international bailout.

Berlin’s stance, describing the carefully worded Greek letter as a “Trojan horse” for shirking commitments, set the scene for tough talks at a crucial meeting of euro zone finance ministers on Friday. Greece’s leftist-led government is scrabbling to avoid running out of money within weeks and will face pressure to make further concessions in Brussels. As the biggest creditor and EU paymaster, Germany has the clout to block a deal and cast Greece adrift without a lifeline, potentially pushing it towards the euro zone exit. But some officials in other capitals saw the German response as tactical and forecast agreement by the weekend after more wrangling.

Nonetheless, despite warm words from those who saw the Greek move as a step forward, Athens remained isolated after a meeting of euro zone officials to prepare Friday’s talks, sources close to the negotiations said. All agreed with Germany that Greece must commit more clearly to abiding by its current credit terms.

A Greek official said Prime Minister Alexis Tsipras had a 50-minute telephone call with German Chancellor Angela Merkel on Thursday, believed to be their first substantive exchange since the Athens government was elected on Jan. 25.

“The conversation was held in a positive climate, geared towards finding a mutually beneficial solution for Greece and the euro zone,” the official said. A German spokesperson confirmed the call but would not comment on the content.

Tsipras also spoke to French President Francois Hollande, who, according to a Greek official, promised to raise the issue with Merkel when she visits him in Paris on Friday.

Earlier, Finance Minister Yanis Varoufakis formally submitted the request after days of backstairs negotiations with the European Commis-sion and the chairman of the Euro-group of finance ministers of the currency bloc.

While officials in Brussels, Paris and Rome welcomed the effort by a government elected on an anti-austerity platform to find a workable formula, German officials said it was full of loopholes with no commitment to respect the bailout terms.

Finance Minister Wolfgang Schaeuble’s spokesman said the Greek proposal did not meet the criteria agreed by the Eurogroup and “goes in the direction of a bridge financing without fulfilling the demands of the programme”.

Economy Minister Sigmar Gabriel said what mattered was what economic reforms Greece was prepared to make, adding: “The letter can only be the start of negotiations.”

The objections from Berlin drew a tart response from Athens, which questioned whether Germany spoke for the other euro zone finance ministers, whose aides were already in Brussels looking at the options during a meeting on Thursday afternoon.

“Tomorrow’s Eurogroup has only two options: either to accept or reject the Greek request,” a Greek official said. “It will then be clear who wants to find a solution and who doesn’t.”

A German paper prepared for Thursday’s meeting of euro zone officials and seen by Reuters said the request was no basis for even starting to draft an accord on Friday.

“The Greek letter is not clear at all, but opens immense room for interpretation,” it read. “It … represents a Trojan horse … in substance putting an end to the current programme.”

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