Feb 18, 2015 5:58 AM

Greece to present creditors with proposal, Germany skeptical

The Associated Press

ATHENS, Greece (AP) Greece was preparing Wednesday to present its creditors with an official proposal aimed to save bailout talks from collapse, as time is running out for a deal that would keep the country solvent and within the euro currency bloc.

Germany, the main European creditor, was quick to say it was skeptical of any new proposals.

Greek government spokesman Gavriil Sakellaridis said Athens' plan would involve extending the 240 billion euro international loan agreement that has kept the country afloat since 2010 but, apparently, without the austerity strings attached.

"We believe the terms of the bailout cannot continue by any means," Sakellaridis told private Antenna TV.

Greek shares were up 1.5 percent in late morning trading on the news, after days of losses, and the eurozone's Euro Stoxx 50 index rose 0.8 percent.

The new radical left-led government in Athens insists it will not accept any extension of the bailout deals that set the strict terms under which the loans were issued. The deep spending cuts and income reductions worsened an economic depression and sent unemployment levels above 25 percent.

Greece's creditors in the 19-country eurozone have given Greece until the end of the week to request an extension of the extant bailout agreement including the associated budget austerity measures after talks Monday failed to make any headway.

In those talks, Finance Minister Yanis Varoufakis told his eurozone counterparts Greece was "ready and willing to apply for an extension of our loan agreement till the end of August, or any other duration that eurogroup may deem fit." He said Greece would also agree on "a number of sensible conditionalities" during that period, according to a transcript of his speech released by the ministry.

He did not elaborate on what conditions the Greek side might find acceptable.

Sakellaridis said the extension proposal was being prepared for submission Wednesday, although officials said it could take another day to finalize.

In an interview with ARD television Tuesday night, German Finance Minister Wolfgang Schaeuble was skeptical, openly referring to the possibility of Greece having to leave the euro.

"We're a bit used to this every day there are different reports, and then when we are in a room together things sound completely different," he said.

Greece was on the "right way," Schaeuble said. "If there is a better way, OK, but we don't see it so far. Simply saying, 'we need more money again and we're not going to do anything any more,' and then insulting people, that absolutely won't work."

The current program expires on Feb. 28. No deal by then could radically increase the cost of financing for Greek banks, potentially placing so huge a strain on the country's financial system that the government could be forced to print its own currency and leave the euro.

"No one in the eurogroup wants to force Greece out of the euro," Schaeuble said. "It's entirely up to officials in Greece."

Another key development was expected Wednesday from the European Central Bank's decision on whether to further extend emergency financial support to Greek banks, which have been suffering a deposit outflow amid the uncertainty of negotiations.

Berenberg Bank analyst Holger Schmieding said that, while chances of a deal have risen a little, a large snag with the Greek proposal is that Athens still rejects the terms attached to the loans it needs.

"A Greek suggestion to not take steps that would directly endanger fiscal targets but go ahead with reversals of structural reforms does not come close to what creditors could accept," he said in a note.

"Wanting to raise the minimum wage for young people while youth unemployment is 50 percent is stupid," Schmieding said. "Expecting European taxpayers to underwrite the damage done by such follies borders on delusional."


Geir Moulson in Berlin, Elena Becatoros in Athens and Pan Pylas in London contributed to this report.


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