Greek officials have rejected out of hand a German idea for Athens to cede control over its budget policy to a special eurozone commissioner.
It comes as the government and the country’s private creditors said they were finalising a deal to slash Greece’s debt, essential to secure a new bailout and avoid a default.
Both sides say the deal follows a framework put forward by eurozone finance ministers.
However, progress could be undermined by problems with the ‘troika’ of foreign lenders: the EU Commission, European Central Bank and IMF.
Their inspectors are back in town demanding unpopular reforms – and threatening to hold up aid unless more is done to streamline the economy.
The Finance Minister Evangelos Venizelos is trying to appease both sides.
“Nothing must be done that will deepen the recession,” he said. “We must do everything to restrict the recession and begin the cycle of growth. The coming days will determine the coming decade. What is happening now is of historical significance, and we must all work together.”
Greece has baulked at the German plan which would effectively mean Athens surrendering sovereignty over tax and spending to the EU, at least until its finances are sorted out.
Many Greeks already blame German Chancellor Angela Merkel’s government for the austerity medicine they are being forced to swallow.
The European Commission has said Athens should retain autonomy.
However, German intervention suggests Berlin is running out of patience with Greece’s failure to meet its targets.