Greece remains defiant as Germany tears up last-ditch debt deal

Greece has vowed to reject any demands for further austerity at a last-ditch meeting with eurozone creditors on Friday, even though the country risks running out of money by next week without a deal. While there is mounting irritation in European Union circles over Germany’s refusal to make concessions, and signs of a Franco-German rift are emerging, the Greeks are on thin ice. Failure to agree a deal could set off a chain-reaction as capital flight accelerates, leading ineluctably to a sovereign default and ejection from the euro.

The only reason for [more austerity] is out of ideology or on punitive grounds. All we are seeking is a way to end the debt-deflation cycle and restore the credit circuits of the Greek economy.

Yanis Varoufakis, Greek finance minister

In substance, the two sides are not that far apart, with new Greek Prime Minister Alexis Tsipras willing to press on with reforms, if different from those embraced by previous conservative governments. In return, Tsipras is demanding that the eurozone agree to short-term funding to buy the time needed to hammer out a new rescue deal, something the requested extension would provide. Germany has rejected this option calling Thursday’s extension request nothing more than “bridge financing, without meeting the requirements of the programme”. As the clock ticked down to a Friday deadline set by Eurogroup head Jeroen Dijsselbloem, European markets held their cool and were little changed.

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