Greece expected to seek loan extension from skeptical euro zone

Wed Feb 18, 2015 5:07pm EST
 
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By Lefteris Papadimas and Jan Strupczewski

ATHENS/BRUSSELS (Reuters) - Greece is expected to ask on Thursday for an extension to its "loan agreement" with the euro zone as it faces running out of cash within weeks, but it must overcome resistance from skeptical partners led by Germany.

With Greece's bailout program due to expire in little more than a week, the government of leftist Prime Minister Alexis Tsipras urgently needs to secure a financial lifeline to keep the country afloat beyond late next month.

Financial markets rallied after Athens said on Wednesday it would submit a request to extend the loan agreement for up to six months, hoping this signaled a last minute compromise to avert a Greek bankruptcy and exit from the euro zone.

EU paymaster Germany and fellow euro zone governments have insisted that no such deal is on the table and Athens must seek an extension to its full bailout, the very program that Tsipras promised to ditch when he was elected last month.

German Finance Minister Wolfgang Schaeuble has poured scorn on suggestions that Athens could negotiate an extension of euro zone funding without making any promises to push on with budget cuts and economic reforms.

But on Wednesday he indicated there may be some possibility of a compromise. "Our room for maneuver is limited," he said during a debate in Berlin, adding, "We must keep in mind that we have a huge responsibility to keep Europe stable."

Greek Finance Minister Yanis Varoufakis expressed confidence on Wednesday that euro zone finance ministers would approve the Athens government proposal in a teleconference on Friday. "The application will be written in such a way so that it will satisfy both the Greek side and the president of the Eurogroup," he said.

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Greek Presidential guards perform during a change of shift at the Tomb of the Unknown Soldier in Athens February 18, 2015. REUTERS/Alkis Konstantinidis