Germany rejects Greek loan proposal

<p>Greek letter is “no substantial proposal for a solution”, according to the German government.</p>

Germany has rejected a Greek request for a six-month extension to its eurozone loan programme, calling it "no substantial proposal for a solution". Greece asked for a six-month assistance package, rather than a renewal of the existing deal.

The office of the German finance minister Wolfgang Schaeuble issued the response today (February 19th), with German finance ministry spokesman Martin Jaeger adding that it amounted to a request "for bridge financing without fulfilling the demands of the bailout programme".

However, the European Commission had earlier called the Greek proposal a positive step: "President Juncker sees this letter as a positive sign, which, in his assessment, could pave the way for a reasonable compromise in the interest of the financial stability in the euro area as a whole," Commission spokesman Margaritis Schinas said. "The detailed assessment of the letter and the response is now up to the Eurogroup," he added.

Markets shaken

Germany's rejection of the Greek proposal signals a rift between Brussels and Berlin and puts a damper on investors' hopes that a deal was on the cards for the end of the week.

The German announcement shook markets, with the FTSE 100 and Frankfurt's DAX index both losing early gains.

Greek debt talks had broke down on Monday, raising the prospect the country might leave the euro currency, after Greece rejected a bailout proposal by its eurozone partners.

If no agreement is reached soon, investors worry that Greece might have little option but to default and exit the eurozone.

"None of my colleagues so far understands what Greece wants… whether Greece itself knows is not clear either," said Wolfgang Schaeuble, quoted by the BBC.

Greek finance minister Yanis Varoufakis declared he was ready to do "whatever it takes" to reach an agreement over Greece's bailout.

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