Greece sent its European creditors a proposal today in a last-moment bid to unfreeze talks on its bailout program and end uncertainty over its future in the euro. Hopes of a deal, however, were quickly dampened by Germany, the main creditor, which said it "is not a substantial proposal for a solution." Athens offered to extend its rescue loan agreement by six months, as the eurozone had demanded so all sides could hash out a more permanent deal. A Greek official says the extension would concern the loan agreement that has kept Greece from bankruptcy for five years, and whose main component expires on Feb. 28. A longer-lasting aid program would possibly keep Greece solvent but also lighten the terms of repaying its $273 billion in bailout loans. The 19 eurozone finance ministers agreed to meet in Brussels tomorrow to try to reach an agreement, but the German reaction suggests the sides are far apart.
The Greek official says that Athens' proposal would seek to focus more on encouraging economic growth and less on reducing debt, which has long been the eurozone's priority. An equity firm head said a rift with Greece's creditors would be in nobody's interest and warned a deal is needed fast. "If there's no agreement in the next few days, there is a risk of (a bank run) because liquidity in Greek banks is very limited and there are many who say that capital controls are very close," he said. If no deal is reached by Feb. 28, the ECB would face increased pressure from eurozone governments to cut off emergency financing for Greek banks, straining the country's finances and causing it to ditch the euro and print its own currency—which would immediately drop in value, pushing up the cost of fuel and key consumer goods.