Greece considers seeking extension to loan agreement

Greece is considering requesting an extension to its loan agreement, government officials have said, in an effort to reach a last-minute deal with the country's European creditors and avoid the danger of a euro exit.

The country would submit the request before Friday, said the officials. They stressed the request would not be for an extension of Greece’s bailout agreement, which includes strict cost-cutting measures as conditions for rescue loans.

The move follows an ultimatum issued by euro zone finance ministers after their meeting to find a solution for Greece collapsed on Monday night.

They have said Greece must ask for an extension to its current bailout by the end of the week in order to reconvene a meeting.

It was unclear whether the Greek request would meet the requirements of the country’s creditors.

Greece’s new left-wing government won elections last month on a promise to renegotiate the country’s bailout agreement.

That deal provided €240 billion in rescue loans from other EU countries and the International Monetary Fund (IMF), but came on the condition that Athens imposed draconian austerity measures in return.

Time is running out for the two sides to reach an agreement. The European part of Greece’s bailout programme expires on February 28th, after which the country will struggle to service its debts.

Earlier today, Greek prime minister Alexis Tsipras sounded a defiant note, saying Greece will not compromise in talks with its European creditors, but that it is working for an "honest and mutually beneficial agreement".

The failure in Monday’s meeting of euro zone finance ministers has increased fears Greece may be forced out of the joint euro currency, although investors seem to believe the two sides will eventually reach an agreement.

Athens insists it cannot ask for the continuation of a programme it considers wrong. Instead, it has asked for a “bridging agreement” that would ensure it does not face any cash liquidity problems while it negotiates a new deal.

“Salvation will not come by extending the mistake,” Mr Tsipras said during a speech to his party deputies in parliament.

“We are not hurrying and we are not compromising,” he said. “We are, however, working hard for an honourable and mutually beneficial agreement - an agreement without austerity and the bailout agreement that destroyed Greece in these past years.”

Anything else, the prime minister said, “is not an agreement but a surrender that would complete the euthanasia of our country”.

Germany, the largest single contributor to the Greek bailout, has been most vocal in insisting Greece stick to its commitments.

German finance minister Wolfgang Schauble, speaking in Brussels, said it was unclear what Greece wanted.

“A lot of colleagues were asking: ‘What do they really want? Do they have a plan?’” Mr Schauble said, adding: “I don’t know.”

Investors are not panicking despite the breakdown in talks. European stocks were steady, while the Athens index fell 2.5 per cent.

Greece’s government borrowing rates rose, however, a sign investors are more wary of a potential bankruptcy.

Agencies