Greek Finance Minister Yanis Varoufakis heads to Frankfurt Wednesday for talks with European Central Bank officials as he seeks to build support for a renegotiation of Athens's 240 billion euro ($270 billion) bailout.
The visit is the latest stop on a diplomatic charm offensive that has seen Varoufakis take his case to London and Rome and comes as Prime Minister Alexis Tsipras visits Brussels to put the plan to European Commission president Jean-Claude Juncker.
Varoufakis's visit to Frankfurt is seen as especially important as the ECB is reported to be opposed to a pivotal part of his plan: a request for bridging finance needed to keep Greece solvent until June.
According to the Financial Times, the ECB's opposition could lead to Athens running out of cash at the end of February -- a suggestion that may spook the markets.
In its Wednesday edition, the FT cited officials involved in deliberations as saying the ECB will refuse Varoufakis's suggestion of raising 10 billion euros in short-term Treasury bills because it refuses to raise an existing cap of 15 billion euros on such debt issuance to 25 billion.
The Greek minister will have another tricky encounter on Thursday, when he meets German counterpart Wolfgang Schaeuble in Berlin in what will be a key test of whether his proposals have any chance of being accepted by the EU's leading powers.
The challenge he faces in Frankfurt stands in stark contrast to his visit to Rome on Tuesday, where Athens' debt plan was welcomed by Italian Prime Minister Matteo Renzi, sparking a rally on international markets.
Renzi told his Greek counterpart Tsipras, who was accompanying Varoufakis, he believed an accord on the debt terms was possible, and promised the visiting leader of Italy's support in trying to achieve it.
"There has to be change in Europe," Tsipras said. "We have to put social cohesion and growth before the policies of poverty and insecurity."
Renzi echoed the call for more growth-orientated policies but pointedly steered clear of any comment on the detail of Greece's proposals, which he said would be discussed by EU leaders next week.
"The world is calling on Europe to invest in growth, not austerity," Renzi said, before joking that the election of Tsipras was a "blessing" because it ensured he was no longer Europe's number one "dangerous lefty".
- Debt swaps not haircuts -
Varoufakis, the Greek finance minister, is pushing the idea of debt swaps that would avoid the need for creditors to accept 'haircuts' on the country's 315-billion-euro foreign debt, while easing the monthly financing burden on the Athens government.
He said Greece's ideas would be put to eurozone finance ministers next week ahead of the summit of EU leaders.
The Greek initiative was interpreted by markets as reducing the likelihood of any unilateral debt cancellation, which would entail a risk of reigniting the kind of financial turmoil that has severely damaged leading economies since 2007.
Led by the Athens bourse, which closed up more than 11 percent, stock markets across Europe rose on the news, as did Wall Street and Asia in turn, while the euro was sharply higher.
"After a week of trading insults and threats it looks like the eurozone paymasters and the new Greek government are finally ready to compromise," said Kathleen Brooks, research director at trading site Forex.com.
The Greek government denied the debt swaps proposal represented a climbdown from election promises to force a renegotiation of its debt terms.
German Chancellor Angela Merkel was non-committal about the Greek proposals. "It is clear the Greek government is still establishing its position," she said. "We await their proposals and there will be time enough to discuss them."
Privately, German officials said there was "little room for manoeuvre" on the debt conditions.
Greece's debt is worth 1.75 times the country's entire annual economic output. Because of severe spending cuts, the government now raises substantially more in taxes than it pays to fund services, but that surplus is more than wiped out by the cost of servicing the debt.
US President Barack Obama on Sunday appeared to side with Greece by warning of the dangers of "squeezing" an economy in the grip of recession.
Tsipras has dismissed the "troika" system monitoring Greece's economy -- the International Monetary Fund, European Commission and ECB -- as lacking legal status.
But he also says Greece has no intention of not meeting its outstanding obligations to the bailout creditors.
After visiting Brussels on Wednesday, Tsipras will visit Paris in search of support from France, the eurozone's second-biggest economy and, like Italy, a critic of EU "austerity".
Source: AFP