Germany quickly rejected a conciliatory bailout proposal by Greece today, dampening hopes that emergency talks might break a deadlock threatening the country with default and an exit from the euro.
The Greek government asked to extend its rescue loan agreement by six months, in order to give all sides more time to hash out a more permanent deal. That goes much of the way toward satisfying an ultimatum from the 19-country eurozone.
It held back, however, on offering to continue in full a series of budget cuts and reforms that the eurozone has required since 2010 in exchange for loans, but that Greece blames for devastating its economy.
Germany was quick to say the plan was not good enough. German finance ministry spokesman Martin Jaeger said it “is not a substantial proposal for a solution.”
He said it amounts to a request “for bridge financing without fulfilling the demands of the (bailout) program,” namely the budget measures. It does not, he added, correspond to what the eurozone countries had demanded of Greece before talks broke down on Monday.
The European executive Commission was somewhat more upbeat.
Spokesman Margaritis Schinas said Commission President Jean-Claude Juncker “sees in this letter a positive sign which, in his assessment, could pave the way for a reasonable compromise in the interest of financial stability in the euro area as a whole.”
He said Juncker held talks with Greek Prime Minister Alexis Tspiras and Dutch Finance Minister Jeroen Dijsselbloem, who will head Friday’s emergency meeting of eurozone finance ministers in Brussels.
A text of Greece’s letter shows it proposing:-a six-month extension to the country’s rescue loans-starting work on a new financial support deal “between Greece, Europe and the International Monetary Fund” which could eventually replace the current bailout agreement-an easing in the repayment terms on Greece’s existing 240 billion euros in bailout loans.
That would be based on an old offer by the eurozone to extend repayment dates and lower interest rates once Greece achieves a budget surplus that is, excluding the cost of debt interest.
Greece has achieved such a surplus-a promise to honor all of Greece’s debt obligations-no unilateral actions by Greece “that would undermine the fiscal targets, economic recovery and financial stability”-any new measures to boost economic growth would not cost new money-supervision of Greece’s reforms by the IMF, European Central Bank and the EU the three institutions whose representatives as debt inspectors the new Greek government has refused to deal with.