Debt-laden Greece and EU paymaster Germany drew firm battle lines as euro zone finance ministers began crunch talks on Monday on the future of an unpopular international bailout for Athens, with EU officials pessimistic about any early deal.
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A Greek official blasted as "unreasonable" and a "waste of time" what Athens believed was a draft proposal presented at the Eurogroup in Brussels. The new government saw it as an attempt to force it to extend Greece's submission to a hated bailout deal and it simply could not accept it, the official said.
A euro zone official questioned that account, saying no such text was discussed as Greek Finance Minister Yanis Varoufakis faced a barrage of opposition from his 18 counterparts.
German Finance Minister Wolfgang Schaeuble said before the talks began that Greece had lived beyond its means for a long time and there was no appetite in Europe for giving it any more money without guarantees it was getting its finances in order.
"What I have heard so far has not strengthened my optimism. It seems like we have no results so far," he said as he arrived for the Brussels talks. "I'm quite skeptical. The Greek government has not moved, apparently."
Varoufakis spelled out in a combative New York Times article his country's refusal to be treated as a "debt colony" subjected to "the greatest austerity for the most depressed economy."
Euro zone officials involved in preparatory talks over recent days said Greece and its creditors had made little progress towards an interim funding deal, citing wide differences over how the new Athens government can deliver on election promises and satisfy lenders.
French Finance Minister Michel Sapin said Europe must respect political change in Athens and joined a chorus of ministers urging the Greeks to extend the current deal to allow time for talks on a longer-term solution.
Other ministers voiced exasperation at the vagueness of the new Greek government's positions so far and urged Athens to put forward concrete, practical proposals.
Varoufakis, who has ruled out requesting an extension, said in the article: "The lines that we have presented as red will not be crossed...
"Our government is not asking our partners for a way out of repaying our debts. We are asking for a few months of financial stability that will allow us to embark upon the task of reforms that the broad Greek population can own and support, so we can bring back growth and end our inability to pay our dues."
EU Economics Commissioner Pierre Moscovici declined to discuss what might happen if the talks failed. The "only aim," he told reporters, was to keep Greece in the euro zone, fully respecting its commitments to creditors while "taking into account the program that the Greek voters chose."
Radical leftist Greek Prime Minister Alexis Tsipras's government was elected last month on a pledge to scrap the bailout, reverse austerity measures and get rid of supervision by the hated "troika" of the European Commission, the European Central Bank and the IMF.
Greece's euro zone partners to date have shown little desire to cut Athens any slack on the austerity demanded in return for 240 billion euros ($270 billion) in financial assistance.
If Monday's talks break down, Greece could be forced out of the euro zone. Progress could mean further negotiations, perhaps later in the week.
An opinion poll showed 68 percent of Greeks want a "fair" compromise with euro zone partners while 30 percent said the government should stand tough even if it means reverting to the drachma currency. The poll found 81 percent want to stay in the euro.
FINANCE AND POLITICS
Deposit outflows in Greece have picked up as initial talks have shown little result. JP Morgan bank said money was fleeing Greek banks at about 2 billion euros a week, leaving 14 weeks before the banks run out of collateral.
The ECB has allowed the Greek central bank to provide emergency lending to its banks, but a failure of the debt talks could mean the imposition of capital controls.
Euro zone member Cyprus was forced to close its banks for two weeks and introduce capital controls during a 2013 crisis. Such controls would need to be imposed when banks are closed. Greek banks are closed next Monday for a holiday.
The ECB will review its policy on Wednesday in the light of the Brussels talks, but an ECB source said it was unlikely to pull the plug on Greek banks as long as terms of a future program were still under discussion.
Greek bond yields inched up on Monday but investors remained cautiously optimistic that Athens would reach a debt deal this week.
Tsipras has requested a bridge program for a few months while a new debt relief deal is agreed to replace the existing bailout, which has already forced drastic cutbacks onto ordinary Greeks.
The current program expires at the end of the month. Some of the problem is semantic. The Greeks will not countenance anything that smacks of an "extension" to the old bailout or a continued role for the supervisory "troika" of international lenders. Tsipras would have a hard time explaining a climb-down so soon.
Germany's Sueddeutsche Zeitung said the Greeks had mooted a four-month "moratorium" in which they would hold off from reversing austerity measures in return for continued euro zone funding. There was no official comment on the report. ($1 = 0.8785 euros) (Additional reporting by Yann Le Guernigou, Michael Nienaber, Andrew Callus, Ingrid Melander, Alastair Macdonald, Adrian Croft, Foo Yun Chee, Robin Emmott, Tom Koerkemeier and Francesca Landini; Writing by Jeremy Gaunt, Paul Taylor and Alastair Macdonald; Editing by Paul Taylor and Giles Elgood)
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