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.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.