Greece to submit loan extension plan to skeptical eurozone creditors

Greece was preparing Wednesday to present its creditors with an official proposal aimed at extending a loan agreement by up to six months — a move that would keep the country solvent and within the eurozone, but likely to bristle those demanding Athens stick with tough austerity conditions.

Germany, the main European creditor, was quick to say it was skeptical over the development, while the European Commission said it was waiting to see what the Greek plan entailed.

Berlin has insisted that any additional funds must come with strings attached to the current bailout arrangement, and that Athens should not be allowed to changes those terms.

But Greece insists that it is merely interested in finding a path that would allow it to grow its economy while still being able to repay its obligations.

The impasse led to the acrimonious breakdown of talks on Monday. E.U. finance ministers responded by setting a deadline of Friday for Greece to apply for an extension.

Greek government spokesman Gabriel Sakellaridis initially said Athens would send a formal application on Wednesday, but a government official later said it would be submitted on Thursday morning.

"We will not back down on certain points that we consider red lines. The [bailout] memorandum died on Jan. 25," Sakellaridis told Antenna TV, referring to the day Greek voters elected a government led by the leftist Syriza party, which had promised to scrap the 240 billion euro bailout, reverse austerity measures and end cooperation with the hated "troika" of inspectors from the Commission, the European Central Bank and the IMF.

Writing in the New York Times earlier this week, Greek Finance Minister Yanis Varoufakis explained that Athens was not trying to shirk its responsibilities.

“Our government is not asking our partners for a way out of repaying our debts,” he wrote, adding: “We are asking for a few months of financial stability that will allow us to embark upon the task of reforms that the broad Greek population can own and support, so we can bring back growth and end our inability to pay our dues.”

Sakellaridis said Athens' plan would involve extending the international loan agreement that has kept the country afloat since 2010 — but change the scope of the austerity measures that have thus far accompanied Greek loans.

Deep spending cuts and income reductions imposed on Athens have worsened an economic depression and sent unemployment levels above 25 percent, critics of the bailout charge.

Part of the Greek plan would seek to diminish the budget surplus that it is currently required to run as a component of its bailout package. Athens would commit to still running a surplus, but at a lower percent of its economic output, something it believes will have a less dampening effect on growth.

But skepticism over the plan was in evidence among other European officials, even before the formal proposal had been submitted.

"We really need to see on paper what exactly the Greek government is requesting," EU Commission Vice President Valdis Dombrovskis said in Brussels.

"The economic situation is developing very rapidly, unfortunately not in a favorable direction," he said. He noted volatility in financial markets and some outflow of deposits from Greek banks. "To deal with these tendencies, markets should be reassured that there is an agreement being prepared."

In an interview with ARD television, German Finance Minister Wolfgang Schaeuble was likewise 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 Tuesday night.

The European part of Greece's bailout expires on Feb. 28. If no deal is reached by then, the European Central Bank would face increased pressure from eurozone governments to cut off emergency financing for Greek banks.

That could place so huge a strain on the country's financial system that the government would be forced to print its own currency and leave the euro. That is generally seen as the worst-case scenario for all sides — Greece's economy could suffer terribly, at least in the short term, and European countries would be stuck with losses on their loans to Greece.

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

Al Jazeera and The Associated Press