Greece was due to make a formal request for a loan extension from eurozone finance ministers yesterday, declaring itself “optimistic” about a compromise plan despite EU skepticism and the specter of a catastrophic “Grexit.”
Athens was expected to send a letter to Eurogroup President Jeroen Dijsselbloem to request an extension of up to six months on its European loan agreement that would sidestep the duties of a full-blown bailout.
Greek Finance Minister Yanis Varoufakis insisted a deal was still possible even after a firm pre-emptive “no” from EU paymaster Germany to its planned offer.
“We are on the right path. I am optimistic it will end well tomorrow or the next day,” Varoufakis told reporters on Wednesday.
“Our proposition will be written in such a way that it will cover both the demands of the Greek side and the head of the Eurogroup,” he said.
Europe and Greece are racing to reach a deal to avoid a Greek exit from the eurozone — dubbed a “Grexit” — after talks in Brussels ended in acrimony on Monday with both sides digging in their heels.
As the clock ticked down to a deadline today set by Dijsselbloem, US Treasury Secretary Jack Lew called Varoufakis to urge him to work on a deal based on the existing bailout agreement.
He told Varoufakis “failure to reach an agreement would lead to immediate hardship in Greece, that the uncertainty is not good for Europe, and that time is of the essence,” Lew said.
The European Commission’s vice president for the euro, Valdis Dombrovskis, said efforts were under way to forge a compromise by finding “common ground for an extension of the current program.”
He said that “the best way forward is to extend the existing program with its conditionality.”
A spokesman for German Finance Minister Wolfgang Schaeuble had earlier said any extension of international loans was “inextricably” linked to reforms agreed by Athens under its 240 billion euro (US$270 billion) bailout.
Schaeuble has accused Athens of wanting something for nothing and has urged Greek Prime Minister Alexis Tsipras to “tell the Greeks the truth: there is no fast way out.”
Meanwhile Greece’s parliament elected pro-European and veteran conservative Prokopis Pavlopoulos as president late on Wednesday in a bid to draw much-needed cross-party support to the debt negotiations.
The chaos surrounding the debt talks has alarmed analysts, with economists at Commerzbank now predicting that a Greek exit from the euro was 50 percent likely.
However, in good news for Greece, the European Central Bank decided to extend and increase the amount of emergency liquidity available to Greek banks, according to a bank source.
The ceiling for emergency assistance to Greek commercial banks had been raised to 68.3 billion euros from 65 billion euros previously, the source said.
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