By George Georgiopoulos and John O'Donnell
ATHENS/FRANKFURT (Reuters) - Greece will submit a request to the euro zone on Wednesday to extend a "loan agreement" for up to six months but EU paymaster Germany says no such deal is on offer and Athens must stick to the terms of its existing international bailout.
The move, confirmed by an official spokesman, is an attempt by the new leftist-led government of Prime Minister Alexis Tsipras to keep a financial lifeline for an interim period while avoiding tough austerity conditions in the EU/IMF program.
But it was unclear whether finance ministers of the 19-nation currency bloc, who rejected such ideas at a meeting on Monday, would accept the application as a basis to resume negotiations. A spokesman for the Eurogroup said no request had been received so far.
Hardline German Finance Minister Wolfgang Schaeuble dismissed the Greek gambit, telling broadcaster ZDF on Tuesday evening: "It's not about extending a credit program but about whether this bailout program will be fulfilled, yes or no."
Greek bond yields fell sharply and shares rallied after government spokesman Gabriel Sakellaridis confirmed Athens would send a formal application on Wednesday.
"Let's wait today for the request for an extension of the loan agreement to be submitted by Finance Minister (Yanis) Varoufakis," he told Antenna TV.
Behind-the-scenes talks were continuing to seek common ground and Greece believed it was on the right path, he said.
"We are coming to the table to find a solution," the spokesman said. "We will not back down on certain points that we consider red lines. The (bailout) memorandum died on Jan. 25."
That was the day Greek voters elected a government led by Tsipras's hard left Syriza party, which had promised to scrap the 240 billion euro bailout, reverse austerity measures and end cooperation with the hated "troika" of inspectors from the European Commission, the European Central Bank and the IMF.
ECB REVIEWS LENDING
The ECB's governing council will meet later on Wednesday in Frankfurt to decide whether to continue and possibly increase emergency lending assistance to Greece's banks, plagued by deposit withdrawals.
The ECB is not expected to pull the plug this week but Germany's Bundesbank is leading opposition to any increase in the funding by the Greek central bank, people familiar with the situation told Reuters.
Without added liquidity, the banks face a tightening squeeze as savers withdraw money that could force Greece to introduce capital controls if there is no deal.
A source close to the Greek government said the loan extension request would be based on a draft text drawn up earlier this week by EU Economics Commissioner Pierre Moscovici, which was discarded by euro zone finance ministers when they met on Monday.
The Moscovici draft leaked to reporters would also have committed Greece not to take unilateral steps to reverse measures implemented under the bailout, but Tsipras told Syriza lawmakers on Tuesday he would hasten legislation to scrap labor market deregulation.
With the current bailout due to expire at the end of February and several euro zone countries needing parliamentary ratification of any change or extension, time is running short.
Eurogroup chairman Jeroen Dijsselbloem has said Greece must request an extension of the existing bailout by the weekend or the program will expire on Feb. 28.
Greece could then run out of money within weeks since it has to make hefty repayments to the IMF in March.
As the deadline approaches, several European leaders called Tsipras to seek a solution, including Italian Prime Minister Matteo Renzi and Cypriot President Nicos Anastasiades. European Commission President Jean-Claude Juncker has also been trying to broker a compromise.
(Additional reporting by Renee Maltezou and Deepa Babington in Athens, Jan Strupczewski in Brussels, Caroline Copley in Berlin and Paul Carrel in Frankfurt; Writing by Paul Taylor; Editing by Sonya Hepinstall)