Greece bailout: Germany rejects six-month loan extension request

Germany has rejected Greece’s request for a six-month loan extension to eurozone.

The rejection came despite the European Commission calling the Greek request “positive” only minutes earlier.

Greece had sought a new six-month assistance package, rather than a renewal of the existing deal that comes with tough austerity conditions.

However, a German finance ministry spokesman said the new plea was “not a substantial proposal for a solution”.

The Greek request letter includes a pledge to maintain “fiscal balance” for a six-month period, while it negotiates with eurozone partners over long-term growth and debt reduction.

The Greek government was also reported as saying that its extension proposal was in order to give Athens enough time, without the threat of “blackmail and time deficits”, to draw up a new agreement with Europe for growth over the next four years.

The German finance ministry spokesman said the Greek request was an attempt at “bridge financing, without meeting the requirements of the program. The letter does not meet the criteria agreed upon in the Eurogroup on Monday.”

Shortly before the German rejection of the proposal, a European Commission spokesman said that Commission president Jean-Claude Juncker regarded the letter as a “positive sign, which, in his assessment, could pave the way for a reasonable compromise in the interest of the financial stability in the euro area as a whole”.

“The detailed assessment of the [Greek loan] letter and the response is now up to the Eurogroup,” the spokesman added, referring to the discussions due to take place on February 20 when European finance ministers meet in Brussels.

In comments aimed at Germany, a Greek government source said the Eurogroup had “just two choices: to accept or reject the Greek request. We will now discover who wants to find a solution, and who does not”.

Tomorrow’s vote on the Greek proposals must be unanimous. If no agreement appears likely before the ministers gather, the meeting could be postponed.

The uncertainty was reflected on stock markets, with the FTSE 100 and Frankfurt’s DAX index both losing early gains after Germany’s rejection.

Greece could run out of money by the end of February without a deal and deposits continue to flow out of its banks.