Greece `blinks first` on bailout crisis but Germany stands firm

 Greece played for time Wednesday after a planned offer to resolve the bailout crisis by asking for a six-month loan extension got a firm preemptive "nein" from EU paymaster Germany.

Athens: Greece played for time Wednesday after a planned offer to resolve the bailout crisis by asking for a six-month loan extension got a firm preemptive "nein" from EU paymaster Germany.

Athens will send a letter to Jeroen Dijsselbloem, head of the Eurogroup, on Thursday to request an extension on its European loan agreement that would sidestep the duties of a full-blown bailout, a government source said.

Government spokesman Gabriel Sakellaridis had initially said the letter would be sent on Wednesday -- suggesting Athens was now scrambling to re-jig the offer before it goes to Brussels.

The possible olive branch lies in the wording: Greece`s ruling Syriza party had sworn it would not apply for a bailout extension but request a bridging loan -- the word bridge has now been dropped, while extension is back on the table.

"Greece blinks first, sort of," Berenberg analyst Holger Schmieding said in a note.

The Athens move "comes with a snag," however: "It wants the money but rejects many of the strings attached to it. That is simply a non-starter."

And a spokesman for German Finance Minister Wolfgang Schaeuble said any extension of international loans to Greece was "inextricably" linked to reforms agreed by Athens under its 240 billion euro ($270 billion) bailout.

"It can`t and won`t be the case that you go for an extension without the agreed reforms," he said.

Europe and Greece are racing to reach a deal to avoid a Greek exit from the eurozone, after talks in Brussels ended in acrimony on Monday with both sides digging in their heels.

Prime Minister Alexis Tspiras said Tuesday that Greece had been ready to sign up to a deal drafted by EU Economics Commissioner Pierre Moscovici that hinged on a loan to buy extra time for deeper negotiations -- but it had been thrown out by the Eurogroup.

The offer of a six-month, strings-free agreement was being seen as a bid to resurrect that deal.

Moscovici told Belgium radio Bel RTL there were "margins for manoeuvre," saying it was "very important we make all the necessary efforts to avoid a rupture which would be damaging for both parties".

The European Commission`s vice president for the euro, Valdis Dombrovskis, also said efforts were under way to forge a compromise by finding "common ground for an extension of the current programme."

He insisted, however, that "the best way forward is to extend the existing programme with its conditionality."Schaeuble has accused Athens of wanting something for nothing and has urged Tsipras to "tell the Greeks the truth: there is no fast way out."

Greece`s radical left government has bitterly rejected any suggestion of prolonging a bailout programme that it says comes with fiscal obligations that have crippled the Greek economy.

But with the European portion of the bailout expiring at the end of February, Greece`s creditors insist it needs extra financing to stave off the risk of a default and exit from the euro.

Dijsselbloem has said Athens has until Friday to request an extension to the bailout and French Finance Minister Michel Sapin said Wednesday that Paris also wanted a deal by the end of the week.

Tsipras has fanned the debt crisis flames by announcing that parliament will vote on a series of social reform bills that flout the bailout obligations on Friday, when the deadline falls.

Measures on the table include scrapping labour market deregulation, reversing a reform called for by Greece`s creditors.

Tsipras`s refusal to play ball has raised concerns that the European Central Bank could limit or even cut off Greece`s access to emergency liquidity assistance (ELA) at a meeting later Wednesday.

The ECB reportedly increased the volume of emergency liquidity available to Greek banks last week to 65 billion euros and could refuse to increase it any further, creating difficulties for the banking sector.

Greece`s parliament will elect a new president on Wednesday with Tsipras`s candidate, former conservative minister Prokopis Pavlopoulos, needing 180 votes to secure this round. 

It was parliament`s failure to agree on a candidate at the presidential election in December which sparked early elections in January that ushered in the radical left Syriza party.

The chaos surrounding the debt talks has alarmed analysts, with economists at Commerzbank now predicting that a Greek exit from the euro was 50 percent likely.

Growing fears of a so-called "Grexit" hammered Greek stocks on Tuesday. But markets rallied across the board and the euro held up Wednesday on hopes of a deal settlement.

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