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Greece defies creditors, seeking credit but no bailout

Greek Finance Minister Yanis Varoufakis gives a news conference Feb. 16 at the end of a meeting of finance ministers at the European Council in Brussels. (Emmanuel Dunand/AFP/Getty Images)

Talks between Greece and euro-zone finance ministers over the country's debt crisis broke down Monday when Athens rejected as "unacceptable" a proposal to request a six-month extension of its international bailout package.

The unexpectedly rapid collapse raised doubts about Greece’s future in the single-currency area after a new leftist-led government vowed to scrap the nearly $275 billion bailout, reverse austerity policies, and end cooperation with inspectors from the European Union and the International Monetary Fund.

Dutch Finance Minister Jeroen Dijsselbloem, who chaired the meeting, said Athens had until Friday to request an extension. Otherwise the bailout would expire at the end of the month. Greece’s government and banks would then face a looming cash crunch.

How long Greece could keep itself afloat without foreign support is uncertain. The euro fell against the dollar after the talks broke up, but with Wall Street closed for the Presidents’ Day holiday, the full force of any market reaction may not be felt until Tuesday. The European Central Bank will decide Wednesday whether to maintain emergency lending to Greek banks. The state faces some heavy loan repayments in March.

Seemingly determined not to be browbeaten by a chorus of euro-zone ministers saying he needed to swallow Greek pride and come back to ask for the extension, Finance Minister Yanis Varoufakis, a left-wing academic economist, voiced confidence that a deal on different terms was within reach within days.

“I have no doubt that within the next 48 hours, Europe is going to come together, and we shall find the phrasing that is necessary so that we can submit it and move on to do the real work that is necessary,” Varoufakis told a news conference, warning that the language of ultimatum has never worked in Europe.

Varoufakis cited what he called a “splendid” proposal from the European Commission, under which Greece would get four to six months of credit in return for a freeze on its anti-austerity policies. He said that he had been ready to sign it — but that Dijsselbloem had then presented a different and “highly problematic” deal.

Commission officials denied offering a separate plan, and Economics Commissioner Pierre Moscovici, the man Varoufakis said presented the proposal, stuck to the same script as Dijsselbloem.

Greece must extend its bailout under the current conditions, he said, even if that could be couched in language that did not embarrass Prime Minister Alexis Tsipras before his supporters.

“We need more logic and less ideology,” Moscovici said as European Union officials fretted about how seriously the novice Greek leaders were taking their finances, and how far concerns about semantics and saving political face might trump pressing economic needs.

Dijsselbloem, who insisted he was willing to be flexible on terminology that has become highly charged for Greek voters, said further talks would depend on Greece requesting a bailout. Varoufakis and the other ministers will remain in Brussels on Tuesday for a routine meeting on the euro-zone economy.

“The general feeling in the Eurogroup is still that the best way forward would be for the Greek authorities to seek an extension of the program,” Dijsselbloem told a news briefing.

The talks, which had been expected to last late into the night, broke up in less than four hours — shorter even than a meeting last week after which euro-zone officials voiced concern over what they called the Greeks’ lack of preparation.

Asked what would happen if Greece did not request a bailout extension, Edward Scicluna, the finance minister of the smallest euro-zone state, Malta, said: “That would be it. It would be a disaster.

“Greece has to adjust, to realize the seriousness of the situation, because time is running out,” Scicluna said.

Germany, the euro zone’s main paymaster and Greece’s biggest creditor, stuck to its hard line.

German Finance Minister Wolfgang Schäuble said before the talks that Greece had lived beyond its means for a long time and that there was no appetite in Europe for giving it any more money without guarantees that it was getting its finances in order.

— Reuters