EU patience frays as Greek PM refuses 'blackmail'

GLIMMERS OF COMPROMISE

Greek Finance Minister Yanis Varoufakis - an academic economist - dismissed suggestions his only option was to ask for the bailout to be extended. He said he had been ready to sign a text floated by EU Economics Commissioner Pierre Moscovici that Greek officials said called for the "loan agreement" to be extended as part of a "transition" to a new deal.

The Greek plan to request an extended "loan agreement" may be an attempt to revive the Moscovici formula shunned by euro zone ministers.

French Finance Minister Michel Sapin suggested Greece could win leeway to run a smaller budget surplus of 1.5 percent of GDP and said clinching a deal was largely a matter of finding the right words. It was not clear whether Sapin's compromise ideas had any backing from Germany or other euro zone hardliners.

Tsipras raised the stakes by vowing to legislate fast to scrap labour market deregulation brought in by his conservative predecessor to meet international creditors' demands for less protection for workers' rights.

Jeroen Dijsselbloem, the Dutch finance minister who chairs the Eurogroup of 19 countries using the common currency, stuck to his guns, saying Athens must seek an extension: "It's really up to the Greeks. We cannot make them or ask them. We stand ready to work with them, also (over) the next couple of days."

Schaeuble and others emphasised the unanimity Greek faced across the table, with some ministers from eastern Europe noting that a minimum wage Tsipras plans to raise is as high as average salaries in some countries where taxpayers funded the bailout.

"TROUBLESOME"

Some other ministers said the new Greek government did not seem to grasp the gravity of the situation or put forward coherent proposals in writing.

"It is troublesome that Greece has twice explained its goals orally, but no written presentation has been given yet," said Finnish Prime Minister Antti Rinne, one of the euro zone hawks.

Time is running short and investors marked down Greek stocks and bonds after Monday's debacle, some saying the risk of Greece exiting the euro had risen.

Three-year government bond yields rose more than a point to 19 percent, highlighting how far Athens remains unable to fund itself at manageable interest rates on the markets.

Dijsselbloem has said Friday is a deadline for a deal that would allow time for some national parliaments to ratify it.

A failure of the debt talks could lead to the imposition of capital controls, limiting money withdrawals and transfers, as happened in Cyprus in 2013.

Investment bank Barclays said the breakdown of talks had raised the risk that Greece would leave the euro zone and raised the prospect that Tsipras would have to call a referendum on whether to accept a deal with strings or ditch the euro.

Chris Scicluna of Daiwa Capital Markets said the failure raised the risk of a "disorderly conclusion". But he added: "All is not lost and we see no need for panic just yet."

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