Finance Finance News Greece warned not to waste time

Greece warned not to waste time

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Greece’s expected request for a loan extension without strings attached has sparked warnings from the EU and US over the perils of losing valuable time with proposals that were doomed to fail.

Athens was playing for time after its planned offer to resolve the bailout crisis got a firm preemptive “nein” from EU paymaster Germany – reawaking the spectre of a catastrophic “Grexit” from the eurozone.

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Greece was expected to send a letter to Jeroen Dijsselbloem, head of the Eurogroup, on Thursday to request an extension of up to six months on its European loan agreement that would sidestep the duties of a full-blown bailout.

Government spokesman Gabriel Sakellaridis had initially said the letter would be sent on Wednesday. The delay suggested Athens was scrambling to re-jig the offer before it goes to Brussels.

As the clock ticked down to a Friday deadline set by Dijsselbloem, US Treasury Secretary Jacob Lew called Greek Finance Minister Yanis Varoufakis to urge him to work on a deal based on the existing bailout agreement.

He told him “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,” the Treasury said.

Lew urged Greece to “build on the foundation that exists to advance growth and reform,” it 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”.

But Prime Minister Alexis Tsipras’s ruling party has refused time and again to do just that, insisting the conditions laid out in an original agreement made with the former conservative government were strangling the economy.

Fitch ratings agency said Greece’s credit rating was at risk due to “continued brinkmanship in the negotiations,” and warned creditors will be reluctant to set a precedent for giving aid without “appropriate conditionality.”

French Finance Minister Michel Sapin also called for a deal by the end of the week.

A spokesman for German Finance Minister Wolfgang Schaeuble earlier said any extension of international loans was “inextricably” linked to reforms agreed by Athens under its 240 billion euros ($A350 billion) bailout.

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.

With the European portion of the bailout expiring at the end of February, Greece’s creditors insist it needs extra financing to stave off the risk of a default and exit from the euro.

Tspiras has said Greece had been ready to sign up to a deal drafted by EU Economics Commissioner Pierre Moscovici on Monday that hinged on a loan to buy extra time for deeper negotiations — but it had been thrown out by the Eurogroup.

Athens’ expected offer of a strings-free loan agreement was being seen as a bid to resurrect that deal.

The olive branch lies in the wording: Greece’s ruling Syriza party had sworn it would not apply for a bailout extension but a bridging loan – the word bridge has now been dropped, while extension is back on the table.

The chaos surrounding the debt talks has alarmed analysts, with economists at Commerzbank predicting that a Greek exit from the euro was 50 percent likely.

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