Greece says not in 'Wild West showdown' with Europe

NICOSIA/LONDON (Reuters) - Greece sought to reassure international investors on Monday that it was not in a Wild West-style standoff with European partners over a new debt agreement, although sparring partner Germany gave no ground after a tough first week.

Spurning neckties, new Prime Minister Alexis Tsipras and his pugnacious finance minister Yanis Varoufakis are touring European capitals in a diplomatic offensive to replace Greece's bailout accord with the European Union, European Central Bank (ECB) and International Monetary Fund, known as the "troika".

Varoufakis said he was confident he could reach a negotiated settlement soon, telling Britain's Channel 4 news it was time to stop Greece being a "festering wound" on Europe and dismissing a suggestion the ECB could block a new deal.

After a tumultuous first week during which the new left-leaning government made clear it intends to keep campaign promises to ditch the tough austerity conditions imposed under its existing bailout, the emphasis this week appears to be on maintaining that a new deal is still possible.

"We are in substantial negotiations with our partners in Europe and those that have lent to us. We have obligations towards them," Tsipras said at a news conference in Cyprus during his first foreign visit as prime minister.

When asked whether Greece would seek aid from Russia, which has suggested it could be willing to listen to a request for support from Athens, he said: "Right now, there are no other thoughts on the table."

Greece, unable to borrow on the markets and facing pressure to extend the current support agreement when it expires on Feb. 28, is looking for a bridging deal to provide breathing space to propose a new debt arrangement.

Exactly how much time Athens has to reach a deal with its creditors remains to be seen. In theory, there are only weeks left: once the bailout expires at the end of February, the ECB could be obliged to pull the plug on funding for Greek banks. In practice, however, an alternative interim funding mechanism for the banks may be found.

After that, Greece has large debt payments due in March, although officials say it could have enough cash on hand to meet them, avoiding a crunch until later in the spring.

"NEIN"

It has so far met a tough line from European partners, above all Germany, whose Finance Minister Wolfgang Schaeuble told Reuters in an interview on Monday that Berlin would not accept any unilateral changes to Greece's debt programme.

"We want Greece to continue going down this successful path in the interests of Greece and the Greeks but we will not accept one-sided changes to the programme," he said at the Reuters Euro Zone Summit.

Tsipras repeated calls already made by Varoufakis for a mechanism of inspections by experts from the "troika" overseeing Greek finances to be dismantled and replaced by direct negotiations between Athens, the EU and IMF.

"I believe that this would be a mature and necessary development for Europe," he said.

But Germany said "Nein".

"The German government sees no reason to scrap this mechanism of evaluation by the troika," Finance Ministry spokeswoman Christiane Wirtz said in Berlin.

To some degree, both sides are posturing ahead of what are certain to be difficult negotiations. The Greeks appear to be searching for more sympathetic ears first, before meeting the Germans.

Varoufakis, an outspoken economist who has likened EU austerity policies to "waterboarding", has been arriving for meetings with besuited European leaders in a rumpled black coat and untucked, open-collared shirt.

He began over the weekend in Paris, where the centre-left government is thought to be more sympathetic than others to the case for relaxing lending conditions, before moving to London to meet international investors whose confidence is crucial.

He said he was not in "a kind of Wild West showdown" with the EU, but aimed to strike a mutually beneficial deal to minimise the cost of the crisis for the average European.

French Finance Minister Michel Sapin said after meeting Varoufakis that Athens could not expect a straight debt write-off, but left the door open to other options that include giving Athens more time for repayment.

SOOTHING INVESTORS

Varoufakis met about 100 banks and financial institutions in London. An organiser said one of the meetings had to be moved from a upmarket London members' club, because Varoufakis wouldn't wear a tie.

A Greek government source said Varoufakis would tell the private sector investors they had nothing to worry about.

"We will be able to service the Greek debt on terms that will have no detrimental impact on, especially private, bond holders," said the source who spoke on condition of anonymity due to the sensitivity of the matter.

Varoufakis also met British officials, seeking more European allies, although Britain is not a euro zone member.

After meeting him, Chancellor George Osborne, called the stand-off between Greece and the euro zone "the greatest risk to the global economy".

"I urge the Greek finance minister to act responsibly but it's also important that the euro zone has a better plan for jobs and growth," Osborne said.

On Tuesday, Tsipras will meet Italy's Prime Minister Matteo Renzi, a young centre-left leader thought to be among those most sympathetic to calls for leniency. He sees European Commission President Jean-Claude Juncker and French President Francois Hollande on Wednesday. So far no date has been set for a meeting with German Chancellor Angela Merkel, although they will meet at a European summit on Feb. 12.

Despite German resistance, Tsipras said the tide of debate in Europe had been unexpectedly encouraging for Athens, with more and more backing for the idea of a change of direction.

"I never expected that there would be such strong forces helping the new government create a new framework and set a new course, not only about Greece but Europe as a whole, because Europe is in a crisis," he said.

(Reporting by Reuters bureaux; Writing by Peter Graff and Philippa Fletcher; Editing by Sonya Hepinstall and Pravin Char)