BRUSSELS/ATHENS - A war of words between Greece and EU paymaster Germany escalated on Tuesday with Athens' new leftist prime minister rejecting what he called "blackmail" to extend an international bailout and vowing to rush through laws to reverse labour reforms.
A source close to the government said Greece intends to ask on Wednesday for an extension for up to six months of a loan agreement with the euro zone, on conditions to be negotiated. The source drew a distinction between a loan agreement and the full bailout programme which the government insists is dead.
However hardline German Finance Minister Wolfgang Schaeuble dismissed the Greek gambit, telling broadcaster ZDF: "It's not about extending a credit programme but about whether this bailout programme will be fulfilled, yes or no."
Financial markets held their nerve after the latest talks among euro zone finance ministers broke down late on Monday and EU partners gave Greece until the end of the week to request an extension or lose financial assistance.
Many investors believe that whatever the rhetoric, both sides will find a face-saving formula before Athens' credit lines expire in 10 days. If they fail, Greece could rapidly run out of cash and need its own currency.
Greek banking sources said outflows of deposits increased on Tuesday after the failure of Monday's talks, but were not as severe as on some days last month around the election of a radical anti-austerity government.
The European Central Bank will review emergency funding for Greek banks on Wednesday but should not cut the lifeline this week, a source familiar with the situation said.
Both sides continue to insist Greece will remain in the euro.
Greek Prime Minister Alexis Tsipras told lawmakers in his Syriza party that the government - elected to scrap the bailout, repeal hated austerity measures and end cooperation with the "troika" of EU, ECB and IMF lenders - would not compromise.
Greece would no longer be treated like a colony of a pariah in Europe, Tsipras said. He accused Schaeuble of losing his cool and making degrading comments about Greece and said "certain circles" in the euro zone were out to undermine his government.
Schaeuble, 72, hammered home a take-it-or-leave-it message, wondering sarcastically whether Tsipras and his "famous economist" of a finance minister knew what they wanted or were making the right choices for the Greek people.
"The question still remains if Greece wants a programme at all or not," he told reporters in Brussels after another day of meetings in Brussels. "On Feb. 28, at midnight, it's over."
Seasoned Eurocrats said Tsipras and his team seemed unprepared, unrealistic and oblivious to the dangers they are courting by refusing to roll over a 240-billion-euro credit deal and demanding easier terms.
Tsipras, 40, said he was in no rush and would not give in to "blackmail" from technocrats - a new hint that he hoped hitherto unresponsive EU leaders would step in and clinch a political agreement with him, which they declined to do last week.
Two of his EU peers who may be trying to broker a compromise - Cypriot President Nicos Anastasiades and Italian Prime Minister Matteo Renzi - telephoned the Greek leader on Tuesday, their offices said without giving details.
EU officials were unsure whether his fierce rhetoric was aimed at bolstering domestic support to avert a backlash against eventual compromise, or signalled he was retreating from a deal.