Germany rebuffs Greek loan extension request

Says the Greek offer doesn't meet the euro region's conditions for continuing aid

Germany rebuffed Greece's request for an extension of its aid programme, saying the Greek offer doesn't meet the euro region's conditions for continuing aid.

The Greek government is trying to obtain bridge-financing without meeting the conditions of its existing rescue programme, German Finance Ministry Spokesman Martin Jaeger said in an e-mailed statement. European Commission Spokesman Margaritis Schinas moments earlier had said the Greek letter could be the basis for a "reasonable compromise".

"The letter doesn't meet the criteria agreed upon in the euro group on Monday," Jaeger said. "In truth, it aims at bridge financing without meeting the requirements of the programme."

With the Greek state and its banks shut out of financial markets and dependent on emergency aid to stay afloat, Prime Minister Alexis Tsipras is retreating from his pledges to end austerity as the country's creditors tighten the financial vise. While he's not yet gone far enough to satisfy Germany, Greek bonds held on to earlier gains as a spokeswoman said Finance Minister Wolfgang Schaeuble still plans to meet his euro-region counterparts in Brussels on Friday.

"No agreement would lead Greece to default,'' Malta's finance minister, Edward Scicluna, said in an interview. "Once you default, it's a terrible thing."

Bond gains

While the euro lost 0.2 per cent, Greek bonds held on to their earlier gains, with the yield on the three-year notes down 54 basis points at 16.83 per cent at 3:48 pm in Athens. That compares with a record 128 per cent in March 2012.

An index of Greek debt known as the Bloomberg Greece Sovereign Bond Index also shows confidence remains well above the worst levels of pessimism during the past five years. The current value of 90.05 is five times the low of 17.45 on June 1, 2012. The gauge peaked at 120 in August.

In a letter to fellow euro member states Greek Finance Minister Yanis Varoufakis offered to work for the "successful conclusion and review" of the current financing agreement with creditors in a bid to avert a cash crunch.

Varoufakis said he wants the European Central Bank to re- introduce a waiver allowing its debt to be used as collateral in refinancing operations as a result of the extension. That would ease the financial restrictions that have helped wring concessions from Tsipras.

Greek goals

Euro-region finance ministers will make a "detailed assessment" of the request and formulate a response, Schinas said at a press conference in Brussels Thursday.

Two euro-area officials said the letter was generally positive, covering many of the issues outstanding. At the same time, it fails to address aspects of Greece's fiscal path which will need to be clarified, the officials said, asking not to be identified because the letter and deliberations are private.

Varoufakis said the extension will also allow Greece to agree on supervision by the European Union, the ECB and the International Monetary Fund and give officials time to negotiate a new deal to allow his country to prosper within the currency union.

"We shall proceed jointly, and making best use of given flexibility in the current arrangement, toward its successful conclusion and review on the basis of the proposals of, on the one hand, the Greek government and, on the other, the institutions," Varoufakis said in the letter.