Germany has rejected a request by Greece to its European partners for a six-month extension to its EU loan program, saying it was "not a substantial proposal for a solution".
Photo: Greek finance minister Yanis Varoufakis remains confident the request will be accepted. (Reuters: Francois Lenoir )
"The letter from Athens is not a substantial proposal for a solution," a spokesman for German finance minister Wolfgang Schaeuble said in a short statement.
"In truth it aims at bridge financing, without meeting the requirements of the program.
"The letter does not meet the criteria agreed upon in the Euro group on Monday."
Debt-wracked Greece sent a make-or-break request to extend its European loan program that expires at the end of the month, but demanding to end hated austerity measures.
Germany has repeatedly poured cold water on offering Greece more time outside the current arrangement, especially the austerity commitments, arguing that any extension of loans was "inextricably" linked to the reforms earlier agreed by Athens.
Eurozone finance ministers set five conditions at their talks Monday for continuing their financial support to Athens, including a pledge not to reverse previously accepted reforms.
Other conditions include that Athens should not undertake new reforms that would burden Greece's public finances, and a commitment by Athens to reimburse all its creditors.
Eurozone finance ministers to consider request
Eurozone finance ministers will meet on Friday afternoon in Brussels to consider the request, the chairman of their Euro group, 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.
But such hopes soon began to fade when Germany objected the request.
Berlin has led sceptical Eurozone governments in demanding that Greece keeps promises made by a previous conservative-led government to implement tough austerity policies and painful economic reforms.
In the letter, Greece pledged to meet its financial obligations to all creditors, recognise the existing EU/IMF program 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 back down by Greek prime minister Alexis Tsipras who had vowed to end cooperation with "troika" inspectors accused of inflicting deep economic and social damage on Greece.
However, the document stopped short of accepting that Greece should achieve this year a surplus on the primary budget - which excludes repayments on Greece's huge debts - equal to 3 per cent of the country's annual economic output, as promised under the bailout deal.
The application will be written in such a way so that it will satisfy both the Greek side and the president of the Euro group.
Greek finance minister Yanis Varoufakis
Mr Tsipras wants to cut that to 1.5 per cent to allow more state spending to ease the plight of the Greek people, while the document left the issue open by speaking of attaining "appropriate primary budget surpluses".
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 Euro group in 2012.
Greece confident proposal will be accepted
Greek finance minister Yanis Varoufakis had expressed confidence on Wednesday that the proposal would be accepted.
"The application will be written in such a way so that it will satisfy both the Greek side and the president of the Euro group," he said.
Crucial details remain to be clarified on the fiscal targets, labour market reforms, privatisations and other measures due to be implemented under the existing program.
Greek stocks initially rose on Thursday's developments, with the benchmark Athens stock index up 2 per cent but slipped back after the German statement, being up just 0.6 per cent on the day.
Banks gained 9 per cent but then shed half the gains.
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 source 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.
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