Greece said it will present a proposal to save bailout talks from collapse to its creditors by today, as time runs out for a deal that would keep the country solvent and within the euro currency bloc.
Germany, the main European creditor, was quick to say it was deeply sceptical, while the European Commission said it would like to see precisely what the proposal entailed.
A Greek government spokesman said Athens’ plan would involve extending the €240 billion international loan agreement that has kept the country afloat since 2010 – but, apparently, without the required spending cuts and tax hikes.
“We believe the terms of the bailout cannot continue by any means,” the spokesman said.
Officials added the proposal would be sent by late today.
Greek shares closed 1 per cent up in afternoon trading yesterday, after days of losses, and the Euro Stoxx 50 index rose 0.5 per cent.
The budget measures have become a major sticking point at this stage of the negotiations.
Both sides agree Greece needs external support to keep it afloat and buy time for more thorough talks.
The new government in Athens, led by the radical left Syriza party, insists it will not accept any extension of the bailout loans if it requires a continuation of the budget austerity measures such as spending cuts or tax hikes.
Syriza blames the measures for deepening an economic depression that sent unemployment above 25 per cent and won general elections last month on the promise to scrap them.
The creditors in the 19-country eurozone say Greece should extend its loans programme, but only if it agrees to continue its austerity programme. The eurozone has given Greece until the end of the week to agree to that.
Finance minister Yanis Varoufakis told his eurozone counterparts this week that Greece was “ready and willing to apply for an extension of our loan agreement till the end of August, or any other duration that eurogroup may deem fit”.
He said Greece would also agree on “a number of sensible conditionalities” during that period, but did not elaborate on what they might be, according to a transcript of his speech released by the ministry.
Analysts said that Greece’s proposal improves the odds for a deal a little, but a large snag is that Athens still rejects the budget terms attached to the loans.
Holger Schmieding, from Berenberg Bank, singled out Athens’ desire to reverse a series of structural reforms, such as raising the minimum wage. He said that “does not come close to what creditors could accept”.
Prime minister Alexis Tsipras said: “We are at a critical juncture in the negotiations. Critical and sensitive.”