Business

Greece is set to request a loan extension, reports say

  • 17 February 2015
  • From the section Business
Greek parliament

Greece is expected to request a six-month extension of its loan agreement on Wednesday, according to reports.

The loan would not be an extension of the current bailout agreement, which includes strict austerity measures, Greek government officials were quoted as saying.

On Monday night, Greece rejected a plan to extend its €240bn (£178bn) bailout, describing it as "absurd".

Without a deal, Greece is likely to run out of money.

It comes as the European Central Bank (ECB) meets later on Wednesday to decide whether to continue providing emergency finance to Greece's struggling banks.

Germany is said to be pressuring the ECB not to allow any extra emergency funding, as part of efforts to convince Athens to agree to extend its international bailout.

The eurozone has given Greece until Friday to decide if it wants to continue with the current bailout deal.

Greece wants to replace the bailout with a new loan that it says would give it time to find a permanent solution to the debt crisis.

Media captionPrime Minister Tsipras: "We are not in a hurry and we will not compromise"

Greece's current bailout expires on 28 February. Any new agreement would need to be approved by national governments, so time is running out to reach a compromise.

Earlier Greek Prime Minister Alexis Tsipras called for a vote to scrap its austerity programme on Friday, the same day as the eurozone deadline.

"We will not succumb to psychological blackmail," Mr Tsipras told parliament.

"We are not in a hurry and we will not compromise."

Earlier, Germany's Finance Minister, Wolfgang Schaeuble, said that Greece needed to make up its mind whether it wanted to extend the bailout programme.

"None of my colleagues so far understands what Greece wants... whether Greece itself knows is not clear either," he said.

Mr Tsipras criticised Mr Schaeuble, saying that the German finance minister had lost his cool on Monday.

"Not because he spoke up against the Greek government, because that is his right, but he spoke condescendingly towards the Greek people," he said.

Bank deposits

The Greek stock exchange closed down by 2.45%, having fallen by as much as 4% earlier in the day.

US investment bank JP Morgan claimed over the weekend that €2bn worth of deposits was flowing out of Greek banks each week and estimated that if that were to remain the case, they would run out of cash to use as collateral against new loans within 14 weeks.

JP Morgan's estimate is based on a calculation that a maximum of €108bn of deposits is left in Greek banks.

The most up-to-date figures from the Greek central bank show deposits dropped 2.4% month-on-month in December to €160.3bn from €164.3bn, marking the third monthly fall in a row.

Media captionWhat would happen if Greece left the euro? Grexit explained - in 60 seconds

Dutch Finance Minister Jeroen Dijsselbloem, who is also chairing the Eurogroup meetings of eurozone finance ministers, warned on Monday night there were just days left for talks.

Mr Dijsselbloem said it was now "up to Greece" to decide if it wanted more funding or not.


Analysis: Theo Leggett, BBC business reporter:

The apparent deadlock in Brussels is hardly surprising, because the two sides have very different goals.

The Greek government wants to scrap the current bailout deal, because of the very painful programme of spending cuts and other austerity measures that come with it. Instead, it wants a bridging loan to help it meet its short term needs, while a new deal is hammered out. Having been elected on an anti-austerity ticket, it can't afford to back down, or it will be accused of betraying Greek voters.

But other members of the eurozone, and Germany in particular, have a very different agenda. They want Greece to accept an extension to the current deal - with the rather uncertain promise of "flexibility" if it plays ball.

They don't want to show any signs of weakness, because of the signal that could send to anti-austerity movements in countries such as Spain, Portugal or Cyprus.

It would also be politically toxic in Germany, where many voters dislike the idea that they are paying for Greece's mistakes.

That doesn't mean a compromise is impossible. It simply means any deal would have to be presented as both an end to the current austerity programme and a continuation of it. A political fudge, in other words - and Brussels has plenty of experience in putting those together. So a short-term solution is possible, but far from certain.


Key dates for Greece - and the eurozone

28 February - Current programme of loans ends

First quarter of 2015 - Greece's funding needs estimated at €4.3bn by end of March

19-20 March - EU leaders' summit

20 July - €3.5bn bonds held by the European Central Bank mature

20 August - €3.2bn bonds held by the European Central Bank mature


Greece has proposed a new bailout programme that involves a bridging loan to keep the country going for six months and help it repay €7bn (£5.2bn) of maturing bonds.

The second part of the plan would see the county's debt refinanced. Part of this might be through "GDP bonds" - bonds carrying an interest rate linked to economic growth.

Greece also wants to see a reduction in the primary surplus target - the surplus the government must generate (excluding interest payments on debt) - from 3% to 1.49% of GDP.

In Greece last week, two opinion polls indicated that 79% of Greeks supported the government's policies, and 74% believed its negotiating strategy would succeed.

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