Germany has rejected a take-it or leave-it request by Athens for a six-month extension to its EU loan program, but both sides indicated later that there is still hope for a solution.
In a sign that a deal could be salvaged, German Chancellor Angela Merkel held talks with Greek Prime Minister Alexis Tsipras by telephone for nearly an hour on Thursday in a ‘positive climate,’ a Greek government source said.
The telephone talks came after Eurogroup head Jeroen Dijsselbloem had said finance ministers from the 19-member eurozone would meet in Brussels on Friday to consider a take-it or leave-it proposal by Athens to extend its European loan program that expires at the end of the month.
But the new radical left government, in office since elections late January, continued to refuse to implement austerity reforms agreed by previous governments with the country’s international lenders in return for a 240 billion euro ($A350.16 billion) bailout.
Key EU powerhouse Germany initially shot the Greek plan down, slamming the request as ‘not a substantial proposal for a solution’ only moments after the European Union had hailed it as a step in the right direction.
‘The letter does not meet the criteria agreed upon in the Eurogroup on Monday,’ said a spokesman for German Finance Minister Wolfgang Schaeuble.
However, German vice chancellor Sigmar Gabriel said later that while the proposal fell short, ‘it must be used as a starting point for negotiations.’
French Prime Minister Manuel Valls also said on Thursday he believed that Greece’s new offer showed the crisis can be solved ‘very quickly.’
The meeting on Friday will be the third in a little over a week by the single currency bloc’s finance ministers to reach a compromise with the new leftist government in Greece after previous talks ended in chaos and recrimination.
A top European official said the stand-off had come down to a clash of personalities with Germany’s Schaeuble furious at the negotiating style of his Greek counterpart, the casual and fast-talking Yanis Varoufakis.
‘There is a real problem of personalities and I understand that. Schaeuble is outraged by comments made by Varoufakis,’ the official said.
Along with its formal request for a loan extension Thursday, Greece offered major concessions, including a return, if not in name, of the hated ‘troika’ mission of creditors that has overseen Athens finances through the last few years.
Faced with the German refusal, Athens said its request was final.
‘Tomorrow’s Eurogroup has just two choices. To accept or reject the Greek request,’ a government source said after the German snub.
‘We will now discover who wants to find a solution, and who does not,’ the official added.
Greece insists it is satisfying the demands of its euro-partners, while also keeping a promise to end the detested austerity conditions in the bailout which it says have destroyed the economy.
As the clock ticked down to a Friday deadline set by Dijsselbloem, Europe’s stock markets mainly rose, with Frankfurt hitting a new record close over hopes of a resolution to the Greek row.
A report by ratings agency Standard & Poor’s meanwhile said the risk of financial chaos spreading in the event of a Greek exit from the eurozone is limited and lower than during the 2012 ‘Grexit’ scare.