Germany proposes alternative plan for 'temporary Grexit'

Germany has floated the idea of a "temporary Grexit" for Greece, as an alternative plan in the case of a failure to reach an agreement with Athens on the reform conditions for a third bailout, Vice Chancellor Sigmar Gabriel told the press on Sunday.

German daily Frankfurter Allgemeine Zeitung reported on Saturday, ahead of the Eurogroup meeting and Eurosummit of leaders on Sunday,  that Finance Minister Wolfgang Schaueble has circulated a position paper at the Eurogroup meeting, which outlined a 'Grexit' of at least five years from the common currency, after which Greece might return to the euro system.

Schaueble’s paper argued that the Greek proposals lacked significant reforms and were not sufficient to start negotiations on a third bailout.

“As debt sustainability and a credible implementation perspective cannot be ensured upfront, Greece should be offered swift negotiations on a time-out from the eurozone, with possible debt restructuring, if necessary, in a Paris Club - like format over at least the next 5 years,” the German position paper argued.

“The time-out solution should be accompanied by supporting Greece as an EU member and the Greek people with growth enhancing, humanitarian and technical assistance over the next years,” it said.

The position paper offered another option, in which Greece would remain within the euro system. Under this plan, Athens would improve its proposals quickly and transfer assets worth 50 billion euros ($56 billion) to a fund in order to pay down its debt.

There has been no response, official or unofficial, from Greece to the Schauble proposals. The Eurogroup meeting will see heavy debate on Sunday over the new bailout for Greece.

Luxembourg: Germany risks profound conflict with France

Germany's push for a 'Grexit' could plunge it into a "profound conflict with France," Luxembourg's Foreign Minister Jean Asselborn told German newspaper Suddeutsche Zeitung on Sunday.

Asselborn made the comments after the German finance ministry proposed that Greece take a five-year 'Grexit' from the euro system.

"It would be fatal for Germany's reputation in the EU and in the world if Berlin does not now seize the chance that there is with the Greek reform offers," he said.

A conflict between Germany and France "would be a catastrophe for Europe," Asselborn said.

The Eurogroup is meeting on Sunday to come to a decision on whether to restart a Greek bailout.

Greece has made an offer for a €53.5 billion ($59 billion) three-year bailout, promising to make a number of economic reforms demanded by creditors.

Should an agreement not be reached on Sunday, Greek banks will be unable to open next week, and the country could be forced to leave the euro system.