BRUSSELS (Reuters) - Greece agreed on Thursday to talk to its creditors about the way out of its hated international bailout in a political climbdown that could prevent its new leftist-led government running out of money as early as next month.
Prime Minister Alexis Tsipras, attending his first European Union summit, agreed with the chairman of euro zone finance ministers, Jeroen Dijsselbloem, that Greek officials would meet representatives of the European Commission, the European Central Bank and the IMF on Friday.
"(We) agreed today to ask the institutions to engage with the Greek authorities to start work on a technical assessment of the common ground between the current programme and the Greek government's plans," Dijsselbloem tweeted. This, he said, would pave the way for crucial talks between euro zone finance ministers on Monday.
The shift by Tsipras marked a potential first step towards resolving a crisis that has raised the risk of Greece, where the bloc's debt crisis began in 2009, being forced to abandon the euro, sparking wider financial turmoil.
"All these discussions and today’s developments signal the intention for a political agreement," the 40-year-old leftist leader, swept to power last month on a wave of anti-austerity protest, told reporters.
Tsipras set out his vision of ending austerity and reviving the economy to fellow leaders but there was no negotiation and they agreed it was for finance ministers to deal with the detailed technical issues.
Dijsselbloem was cautious about prospects for a deal, telling reporters: "It is going to be very difficult. It is going to take time. Don't get your hopes up yet."
On Wednesday night, euro zone finance ministers had failed to agree even on a statement on the next procedural steps because Athens did not want any reference to the unpopular bailout, nor to the despised "troika" of lenders enforcing it.
Though he will be negotiating with the EU, ECB and IMF, Tsipras said the "troika" no longer existed. He won election promising to scrap the 240 billion euro (177 billion pounds) bailout, end cooperation with the "troika", reverse austerity measures that have cast many Greeks into poverty and negotiate a reduction in the country's huge debt burden.
The procedural step forward came after the ECB's Governing Council extended a cash lifeline for Greek banks for another week, authorising an extra 5 billion euros in emergency lending assistance (ELA) by the Greek central bank. The council decided in a telephone conference to review the programme on Feb. 18.
Timing the review right after euro zone finance ministers meet again next week keeps Athens on a short leash.
The ECB authorised the temporary funding expedient for banks last week when it stopped accepting Greek government bonds in return for liquidity.
German Chancellor Angela Merkel, vilified by the Greek left as Europe's "austerity queen", said Berlin was ready for a compromise and finance ministers had a few more days to consider Greece's proposals before next Monday's meeting.
"However, it must also be said that Europe's credibility naturally depends on us respecting rules and being reliable with each other," she said.
The two leaders came face to face for the first time in the EU Council chamber. Merkel said she congratulated Tsipras on his election and said she hoped for good cooperation despite the difficulties. Tsipras reciprocated briefly but they had no private meeting during the one-day summit.
Other leaders said it was up to Greece to respect budget discipline and economic reform commitments made by previous governments if it wanted continued aid.
The two sides remain far apart on the subject of Greece's future funding, fiscal and economic policies.
Finance Minister Yanis Varoufakis has proposed swapping euro zone loans for long-dated GDP-linked bonds that would pay interest as the economy recovers, and ECB holdings of Greek debt for interest-bearing perpetual bonds with no repayment deadline.
ECB policymaker Jens Weidmann, head of Germany's Bundesbank, said the official loans already had long maturities, low interest rates and in some cases an interest repayment holiday, so rescheduling would not help Greek finances in the short term.
Greece should only receive more support if it complies with its existing agreements, he said, adding that a relaxation of Greek targets would be "counter-productive" to restoring investor confidence.
Highlighting the precariousness of Greece's position, tax revenues fell about 1 billion euros short of the budget target in January as Greeks held off payments before the Jan. 25 election, anticipating that the new leftist government would scrap an unpopular property levy.[nL5N0VM4IK]
European Commission President Jean-Claude Juncker offered a caution to Tsipras, telling a post-summit news conference that the elected Greek government was free to adjust its budgets according to changed priorities - but that any extra spending or forgone revenue would need to be made up in full from elsewhere.
A Greek official played down the threat to the banking system if the ECB were to cut off funding after Feb. 28.
"If we have a conclusion that says there is a programme in place, or if we are close to an agreement, no liquidity problems will exist," he said.
The euro zone, the ECB and IMF are insisting on firm conditions for any "bridge" financing. Other governments, including Ireland, Portugal and Spain, which have had to seek help under tough conditions, are also keen their own voters do not see Tsipras winning a better deal than they did.
"The EU has shown great solidarity ... and the important thing now is that Greece, which has already begun to grow, complies with the rules, complies with the commitments that it took on at the time in exchange for the loans," Spanish Prime Minister Mariano Rajoy said.
EU officials play down the risk of Greece being forced out of the euro zone, something Tsipras and most Greeks do not want and which could send destabilising ripples across the bloc as it faces a confrontation with Russia over Ukraine.
However, the politics of the Greek debate are difficult.
"The real risk in Athens seems to be that Tsipras has raised expectations to such an extent that he could find it extremely difficult to back down from his rhetoric and strike a deal which the rest of the Eurozone could accept," Berenberg Bank economists wrote in a note on Thursday.
Additional reporting by Jan Strupczewski, Alastair Macdonald, Foo Yun Chee, Robin Emmott, Tom Koerkemeier, Paul Taylor, Andreas Rinke, Barbara Lewis, Adrian Croft, Philip Blenkinsop and Julien Ponthus in Brussels and Jeremy Gaunt, Lefteris Papadimas and Angeliki Koutantou and Deepa Babington in Athens; Writing by Alastair Macdonald and Paul Taylor; editing by David Stamp, Sophie Walker, Mark Trevelyan and Alastair Macdonald