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Europe

Berlin rejects loan extension despite Greek concessions

© AFP / Louisa Gouliamaki | Greek Prime Minister Alexis Tsipras (R) and Finance Minister Yianis Varoufakis sit during the vote for president at the Greek parliament in Athens on February 18, 2015

Text by FRANCE 24

Latest update : 2015-02-19

Greece offered concessions and formally requested a six-month extension to its eurozone loan agreement Thursday as it raced to avoid running out of cash within weeks, but immediately ran into objections from EU paymaster Germany.

Greece did not, however, offer to continue with the budget cuts and reforms that the eurozone has required since 2010 in exchange for the loans but which Greece blames for devastating its economy.

"The letter from Athens is not a substantial proposal for a solution," said Martin Jaeger, a spokesman for German Finance Minister Wolfgang Schaeuble, in a short statement.

"In truth it aims at bridge financing, without meeting the requirements of the programme.”

The proposal also did not meet the criteria agreed by the Eurogroup of eurozone finance ministers on Monday, Jaeger added.

The make-or-break proposal requested an extension to Greece's European loan programme, which expires at the end of the month, in exchange for a number of concessions by the new government of leftist Prime Minister Alexis Tsipras.

But it also demanded an end to hated austerity measures initially agreed to by Athens under the original terms of the bail out.

In a document seen by Reuters, Greece pledged to meet its financial obligations to all of its creditors, recognise the existing bailout programme as the legally binding framework and refrain from unilateral action that would undermine fiscal targets.

Crucially, it accepted that the extension would be monitored by the European Commission, European Central Bank and International Monetary Fund – a key reversal for Tsipras, who has vowed to end cooperation with the “troika” that he accuses of inflicting deep economic and social damage on Greece.

However, the document stopped short of requiring Greece to achieve a 3 percent surplus on its primary budget – excluding repayments on its huge debts – as promised under the bailout deal.

Tsipras wants to cut the required surplus to 1.5 percent to allow for more state spending that could ease the plight of the Greek people. The document left the issue open by speaking of aiming for “appropriate primary budget surpluses”.

The six-month extension 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.

Germany has repeatedly balked at offering Greece more time beyond the current arrangement, especially its 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 on Monday for continuing their financial support to Athens, including a pledge not to reverse previously accepted reforms.

Other conditions included requiring Athens not to undertake any new reforms that would further burden the country's public finances and a commitment to reimbursing all of Greece's creditors.

(FRANCE 24 with AFP, REUTERS)

Date created : 2015-02-19

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