Eurogroup president Jeroen Dijsselbloem received a request from Greece for a six-month loan extension early Thursday.
As more details roll out about the Greek position, it is increasingly looking like a massive climb-down for the radical new government. It is a request for an extension of the existing bailout, which Athens had refused to sign up to since its government was elected in late January.
But even though Athens appears to be giving up a huge amount of ground, Germany will not accept the proposal, according to Reuters. Here’s what they have got:
“The letter from Athens is not a proposal that leads to a substantial solution,” ministry spokesman Martin Jaeger said in a statement.
“In truth it goes in the direction of a bridge financing, without fulfilling the demands of the programme. The letter does not meet the criteria agreed by the Eurogroup on Monday.”
Another meeting of the Eurogroup (the finance ministers of each eurozone nation) will be held Friday for discussing the proposal. That follows a meeting that collapsed Monday, and another last Friday.
The bailout agreement as it stands is tied to significant austerity and economic reform policies the Greek government wants scrapped and rolled back, so until now at least, it was refusing to agree to any continuation of the existing programme.
Just a few days ago Prime Minister Alexis Tsipras said Athens would not compromise on the bailout.
Reuters also has the whole document that Greek Finance Minister Yanis Varoufakis has written to the Eurogroup.
Here’s the important bit:
The Greek authorities honour Greece’s financial obligations to all its creditors as well as state our intention to cooperate with our partners in order to avert technical impediments in the context of the Master Facility Agreement which we recognise as binding vis-a-vis its financial and procedural content.
In this context, the Greek authorities are now applying for the extension of the Master Financial Assistance Facility Agreement for a period of six months from its termination during which period 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.
The Master Financial Assistance Facility Agreement (MFAFA) is just the official name of the bailout. This seems like a major capitulation on Athens’ part. The Greek government seems to want some concessions — like for the ECB to restore Greek government debt as collateral for the country’s struggling banks — but the overall theme here is a climb-down.
Despite the German opposition, French Prime Minister Manuel Valls called Greece’s statement “very encouraging” later on Thursday, suggesting that Europe’s second biggest economy will be much more open to the agreement on the table.
Some other voices in the Eurogroup have also been less negative. Italian finance minister Pier Carlo Padoan gave an interview to L’Espresso with a more conciliatory tone before Thursday morning’s events. Here’s a snippet, translated into English by think tank Open Europe:
The Greek government has put on the table a demand that must be taken seriously: take Greece out of a long period of crisis. In order to do so, Greece must transform itself structurally, and become more dynamic with a medium-term programme. Italy supports this demand. But in order to get to this point, one needs to go through a delicate transition phase where one needs to decide what to do with previous commitments and how to design the new ones. One must give the signal that the euro is irreversible. If a country were to exit, there would not only be one country less in the Union, but the euro would be transformed into a mechanism that can be undone. A mechanism different from the single currency
German Vice Chancellor Sigmar Gabriel also voiced a different view to the country’s finance ministry (he’s the leader of the social democrats in Germany’s governing coalition. According to Bloomberg’s Patrick Donahue, he said the country should say yes or no to the Greek proposal too quickly.
The announcement of the proposal from Athens initially sent Greek stocks surging up Thursday morning, driven by a surge in Greece’s remaining listed banks. That’s despite the rumour that the European Central Bank is prodding Greece to bring in capital controls. The Athens Stock Exchange then tumbled when the German position was announced, leaving it up 0.98% as of 2:20 p.m. GMT (9:20 a.m. ET).