By Renee Maltezou and Jan Strupczewski
ATHENS/BRUSSELS (Reuters) - Greece formally requested a six-month extension to its euro zone loan agreement on Thursday, offering major concessions as it raced to avoid running out of cash within weeks and overcome resistance from sceptical partners led by Germany.
With its EU/IMF bailout programme due to expire in little more than a week, the government of leftist Prime Minister Alexis Tsipras urgently needs to secure a financial lifeline to keep the country afloat beyond late March.
Euro zone finance ministers will meet on Friday afternoon in Brussels to consider the request, the chairman of their Eurogroup, Jeroen Dijsselbloem, said in a tweet.
That raised hopes of a deal to avert possible bankruptcy and a Greek exit from the 19-nation currency area.
A government official told Reuters that Athens had asked for an extension to its "Master Financial Assistance Facility Agreement" with the euro zone. However, he insisted the government was proposing different terms from its current bailout obligations.
Greece had committed to maintain fiscal balance during the interim period, take immediate reforms to fight tax evasion and corruption, and measures to deal with what Athens calls its "humanitarian crisis" and kick-start economic growth, he said.
In the document seen by Reuters, Greece pledged to meet its financial obligations to all creditors, recognise the existing EU/IMF programme as the legally binding framework and refrain from unilateral action that would undermine the fiscal targets.
Crucially, it accepted that the extension would be monitored by the European Commission, European Central Bank and International Monetary Fund, a climbdown by Tsipras who had vowed to end cooperation with "troika" inspectors accused of inflicting deep economic and social damage on Greece.
The six month interim period would be used to negotiate a long-term deal for recovery and growth incorporating further debt relief measures promised by the Eurogroup in 2012.
Euro zone partners have so far said Athens must comply with the terms of the current bailout, which require it to run a 3 percent primary budget surplus this year, before debt service payments.
Senior euro zone officials were due to hold a teleconference later on Thursday to discuss the Greek application.
The wording chosen could help to satisfy at least some of the concerns that have held up agreement over the past two weeks, allowing Athens to avoid saying it is extending the current programme that it opposes while creditors can avoid accepting a "loan agreement" without strings attached.
Crucial details remain to be clarified on the fiscal targets, labour market reforms, privatisations and other measures due to be implemented under the existing programme.
Government spokesman Gabriel Sakellaridis dismissed a German newspaper report that Athens was under pressure to impose capital controls on Greeks pulling their money out of local banks, telling Reuters that such a scenario "had no bearing on reality".
An ECB spokeswoman also denied the Frankfurter Allgemeine Zeitung report, saying there had been no discussion of capital controls at a meeting of the central bank's Governing Council on Wednesday, which slightly raised the limit on emergency lending to Greek banks.
Greek stocks rose on Thursday's developments, with the benchmark Athens stock index up 2 percent while banks gained 9 percent.
"We are doing everything to reach a mutually beneficial agreement. Our aim is to conclude this agreement soon," Sakellaridis told Skai TV earlier on Thursday. "We are trying to find common points."
GERMAN COMPROMISE?
EU paymaster Germany and fellow euro zone governments have so far insisted no loan deal without the full bailout conditions is on the table. Tsipras promised to ditch austerity measures imposed by the lenders when he was elected last month.
German Finance Minister Wolfgang Schaeuble has poured scorn on suggestions that Athens could negotiate an extension of euro zone funding without making any promises to push on with budget cuts and economic reforms.
But on Wednesday he indicated there may be some possibility of a compromise. "Our room for manoeuvre is limited," he said during a debate in Berlin, adding, "We must keep in mind that we have a huge responsibility to keep Europe stable."
Greek Finance Minister Yanis Varoufakis expressed confidence on Wednesday that euro zone finance ministers would approve the Athens government's proposal on Friday. "The application will be written in such a way so that it will satisfy both the Greek side and the president of the Eurogroup," he said.
Greece's finances are in peril. It is burning through its cash reserves and could run out of money by the end of March without fresh funds, a person familiar with the figures said.
Likewise its banks are dependent on the emergency funding controlled by the ECB in order to pay out depositors who have been withdrawing their cash. The ECB agreed on Wednesday to raise a cap on funding available under its Emergency Liquidity Assistance scheme to 68.3 billion euros (US$78 billion), a person familiar with the ECB talks said.
That was a rise of just 3.3 billion euros, less than Greece had requested. The modest increase raises the pressure for a compromise at the Eurogroup. One senior banker said it would be enough to keep Greek banks afloat only for another week if present outflow trends persist.
Euro zone finance ministers rejected Greek proposals to avoid the bailout conditions at a meeting on Monday.
German Chancellor Angela Merkel made clear on Wednesday that Athens would have to give as well as take in negotiations.
"If countries are in trouble, we show solidarity," she said in a speech to conservative supporters, naming Greece and other euro zone countries that had to take bailouts during the debt crisis. But she added, "Solidarity is not a one-way street. Solidarity and efforts by the countries themselves are two sides of the same coin. And this won't change."
(Additional reporting by Renee Maltezou and Deepa Babington in Athens, Jan Strupczewski in Brussels, Gernot Heller, Michael Nienaber and Caroline Copley in Berlin, Jason Lange in Washington and Paul Carrel in Frankfurt; Writing by David Stamp and Deepa Babington; Editing by Peter Graff and Paul Taylor)
