After weeks of posturing, the Greek government this morning submitted its formal request for an extension to its Eurozone loan agreement.
European markets edged down, with the FTSE 100 dropping 0.4 per cent, Germany's Dax falling 0.7 per cent and France's Cac losing 0.5 per cent in early trading. The euro hit a two-day high against the dollar, rising to 1.1424.
However, the market in Athens rose 0.57 per cent in early trading after yesterday's agreement by the European Central Bank (ECB) to inject €3.3bn into Greek banks in the form of emergency liquidity assistance pushed bank stocks up more than 5.5 per cent.
Greece was expected to request to extend its loan agreement for up to six months, allowing it to avoid a deadline which would cause it to run out of cash at the end of next week.
But Yanis Varoufakis, the country's maverick finance minister, will have to contend with tough opposition from partners led by Germany, which is said to be gunning for Greece to continue with its full bailout plan, the conditions of which include a tough austerity programme. Wolfgang Schaeuble, Germany's finance minister, is said to be particularly against the idea that Athens could negotiate an extension to its loan without pledging to cut budgets and make other economic reforms.
This morning German newspaper Frankfurter Allegemeine Zeitung reported that the European Central Bank is pushing for Greece to introduce capital controls, imposing limits on the amount savers can withdraw from banks. Since the beginning of February, deposits in Greek banks have fallen by €3bn, following outflows on €12bn in January and €4bn in December.
But Varoufakis insisted that both sides would approve a new programme.
The application will be written in such a way so that it will satisfy both the Greek side and the president of the Eurogroup.