Greece to seek four-month bailout extension

Greece is expected to request an extension of its loan agreement with international creditors, bowing to days of EU pressure to negotiate some form of temporary programme in advance of the expiration of its bailout in 10 days' time.

The Greek government is expected to request a four-month extension on Wednesday, broadly in line with a proposal drafted by the European Commission on Monday but rejected by the eurogroup of euro zone finance ministers.

However, Greek officials stressed that the extension would not be a continuation of the current bailout programme but rather an extension of the loans underpinning that programme.

The potential breakthrough – which will still have to be endorsed by euro zone finance ministers – follows days of acrimony between the Greek government and its European creditors. Greece faces a multibillion-euro funding shortfall when its bailout expires on February 28th.

A eurogroup meeting on Monday ended in disarray amid recriminations from both sides about who was to blame.

EU officials disputed claims by Greek finance minister Yanis Varoufakis that an early draft communiqué proposed by the European Commission had been amended by eurogroup president Jeroen Dijsselbloem.

Emergency liquidity

The development came as the European Central Bank meets to consider whether to increase the amount of emergency liquidity assistance available to the Greek financial system.

The bank’s decision two weeks ago to stop accepting Greek government bonds as collateral for funds has increased the Greek banking sector’s dependence on emergency funding.

Though technically national central banks provide such assistance to banks, the ECB can restrict the measure if a two-thirds majority is in favour of the move.

Deposits have been flowing out of Greek banks since late last year, prompting concerns that capital controls could be introduced in the country.