GREECE'S crunch talks with its European creditors broke down after just four hours today, pushing the country closer towards a potential exit from the single currency.
Greece refused to countenance an extension of the existing €172bn bailout programme, while the rest of the eurozone's finance ministers said this was a non-negotiable first step to talks.
"There is no alternative to a request to an extension of the programme" said Pierre Moscovici, the European Commission's economics and financial affairs commissioner. That was echoed by Jeroen Dijsselbloem, the chairman of the Eurogroup. "It is up to the Greek authorities now to decide whether they would want such an extension" he said. "There was a very strong opinion across the whole Eurogroup that it has to come from the Greek authorities... They have to make up their mind whether they will ask for an extension of the current programme."
Mr Dijsselbloem said there could be a new Eurogroup meeting on Friday if Greece requested an extension over the next few days. However, the Greek side suggested that Mr Dijsselbloem had gone back on an earlier understanding by trying to push Greece into extending the existing agreement.
A draft text leaked from the Brussels meeting of eurozone finance ministers contained the suggestion that Greece would "successfully conclude the [bailout] programme" and "request a six-month technical extension". The Athens government has repeatedly said it will not agree to continue with the existing programme, which it blames for pushing Greece into a deep economic depression. It is instead demanding a bridge loan from creditors until the summer while an entirely new programme can be fashioned. It wants this to include a cancellation of a large tranche of the country's debt and an easing of the requirement for Greece to run primary budget surpluses for the forseeable future.
The Finance Minister, Yanis Varoufakis, tonight said there would be no capitulation to the pressure from the Eurogroup. "Nothing good has ever come out of ultimatums... In the next few days any notion of ultimatum is going to be withdrawn," he said.
The country's bailout is due to lapse on 28 February. Without a new agreement in place by then, Greece could find its banking system shut off from access to the European Central Bank's liquidity lifeline.
Greek three-year bond yields yesterday rose above 17 per cent, while 10-year bond yields hit 9.47 per cent. The higher near-term effective borrowing costs of the country imply heightened investors default concerns. "With every day of stalemate, the Greek economy, its banking system and its tax revenues are likely to weaken further," said Holger Schmieding of Berenberg Bank.
There were few signs of support for Greece from other eurozone states last night. "There is no chance of a bridge loan [for Greece], so this has left us working with the extension of the programme," said Edward Scicluna, the Maltese Finance Minister. Asked what would happen if the Greeks did not ask for a programme extension, he added: "That would be it; it would be a disaster."
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