Greece, Germany face-off in last chance debt talks

GERMANY and Greece face off again Friday in search of a last minute bailout compromise, with Berlin insisting Athens accept continued austerity in return for fresh aid.

After days of sharp exchanges, the 19 eurozone finance ministers gather for their third meeting in little over a week to consider a take-it or leave-it proposal by Athens that they extend an EU loan programme which expires this month.

Europe’s paymaster Germany initially rejected the request out of hand but a lengthy phone call between left-wing Greek Prime Minister Alexis Tspiras and German Chancellor Angela Merkel late Thursday appeared to calm the waters.

The conversation was “aimed at finding a mutually beneficial solution for Greece and the eurozone,” a Greek government source said, adding that it took place in a “positive climate.”

The call came after a Greek government source released a very unflattering document said to outline Berlin’s position at official-level talks Thursday.

The Greek proposal “is not clear at all… . It rather represents a Trojan horse, intending to get bridge financing and in substance putting an end to the current programme,” the German reaction read, according to the Greek source.

“On this basis it makes no sense to start drafting a Eurogroup statement on Friday,” it added.

Financial markets were calm Friday, reassured to some extent by the Tsipras-Merkal call while keeping a close eye on the finance ministers’ meeting due to start at 1400 GMT.

The United States also pressed the EU and Greece to reach agreement, stressing it would require “vigorous engagement from both sides”.

“The message to Germany is broadly parallel to the one to Greece and others in Europe… it’s important for the euro and the global economy to reach agreement,” a senior US Treasury official said.

Time is pressing to find a solution before the current bailout programme ends, for fear that failure could see Greece run out of money and be forced out of the eurozone within weeks.

Analysts cautiously downplay this possibility, saying the eurozone is much stronger now than at the height of the debt crisis in 2011-12 but the uncertainty weighs heavily at a time when the economy has faltered and governments are desperate to boost growth.

A top European official said the stand-off had come down to a clash of personalities with German Finance Minister Wolfgang 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.

In its request Thursday, Greece offered some major concessions including a return, if not in name, of the hated “troika” mission of creditors that has overseen Athens’s finances through two bailouts.

But stung by Schaeuble’s rejection, Athens said its request was final and that Friday’s meeting had “just two choices. To accept or reject the Greek request.”

Tsipras insists he can satisfy both the demands of Greece’s partners and meet a promise to voters to end the detested austerity conditions in the bailout, which he says destroyed the economy.

“The government… is not asking for an extension to the memorandum,” an official source in Athens said, referring to the reform agreement between Greece and the troika – the EU, European Central Bank and International Monetary Fund creditors.

Instead, it wants an extension to the loan part of the 240-billion-euro ($270-billion) rescue that came with commitments to push through austerity and deep reforms.

Up to now, opponents led by Germany say this distinction is unacceptable and that Greece has to accept the austerity commitments of the full programme.