Greek bailout: Germany shatters hopes of deal after rejecting proposal for six-month loan extension

German Foreign Minister claimed that the request amounted to 'bridge financing' without meeting any of the key creditor's conditions

A woman waves a Greek flag during a speech by the leader of Syriza left-wing party Alexis Tsipras outside Athens University Headquarters

The German government has rejected Greece’s application for a six-month loan extension, effectively shattering hopes that a partial solution to the debt-ridden country may be in sight.

Greek ministers reportedly requested a “six-month extension”, asking the European Commission for an assistance package rather than a renewal of the tough austerity deal which has seen vast numbers of Greeks laid off and the welfare system decimated.

Earlier today the signs appeared positive, with Commission spokesperson Margaritis Schinas labelling the request “positive”.

However, these hopes – which buoyed Greek shares up two points this morning – were dashed after German foreign minister Wolfgang Schaeuble said it was “not a substantial proposal for a solution”.

Germany, as a key creditor, has refused to distribute aid for struggling countries without stringent conditions.

Their decision has sent the Euro lower, down 0.3 per cent against the dollar, but Greek shares remain up although to a lesser extent than the market’s earlier enthusiasm.

The proposal from the Greeks was to be discussed in detail tomorrow in Brussels but the seemingly abrupt volte face of the German minister indicates the letter may not reach that later stage.

Earlier, a spokesperson for the European Council president Jean-Claude Junker said: “President Juncker sees this letter as a positive sign which, in his assessment, could pave the way for a reasonable compromise in the interest of the financial stability in the euro as a whole.”

Additional reporting by Press Association