Greek finance minister urges short bailout extension

By Renee Maltezou BRUSSELS (Reuters) - Greek Finance Minister Yanis Varoufakis called on European ministers on Saturday to extend his country's bailout by a few more weeks to take account of a referendum on austerity demands by creditors, urging them to show flexibility. Athens called the plebiscite on whether to accept those demands overnight, blindsiding EU states who had been meeting to hammer out a deal to save Greece from defaulting on a big debt payment on Tuesday, when the bailout expires, and possibly leaving the euro. "We are going to suggest to them that under these circumstances we should have an extension for a few weeks to ensure that the people are heard," Varoufakis told Reuters, on his way to a Eurogroup meeting of finance ministers. "And then we commit as a responsible government to whatever the voters tell us to do. We shall set out to achieve the next day, to reach a very quick deal with our creditors and our partners and the institutions in the spirit of the verdict of the people." The comments underlined the leftwing government's wish to keep dealing with its creditors, even after Prime Minister Alexis Tsipras rejected what he called their "ultimatum" and calling their proposals blackmail. How far it will get remains in doubt given comments from several European ministers that the decision to call a referendum on July 5, after the debt deadline, effectively closed the door on further negotiations. But Varoufakis declined to say what would happen if Greece did not get the extension. "I don't want to speculate on failure," he said. Varoufakis again dismissed the strict terms demanded by creditors, including a mix of tax hikes and pension cuts but excluding any element of debt relief, saying they would result "with mathematical precision" in returning Greece to the "devastating" position it was in today. "This is not what Europe needs, this is not what Greece needs," he said, adding that putting the package to a vote would give democratic legitimacy to the process. "We understand the critical nature of the moment in history that we find ourselves in. And as a result we feel that we have the obligation to seek the views of the Greek people," he said. He pointed to Greece's longstanding demand to be given access to the 1.9 billion euros it is owed from the ECB's so-emergency bond-buying operation, dubbed the Securities Markets Programme. Releasing the funds would allow Greece to meet an IMF payment deadline on a 1.6 billion euro loan that falls due on Tuesday and which, as things stand, it will struggle to meet. "That will depend on whether there is sufficient flexibility from the side of our partners," he said. "This is our money, we have been proposing for months that this money is transferred to the IMF, that would be a very simple way and efficient, fair of dealing with this problem," he said. He declined to say how he thought the European Central Bank should respond to the dire situation facing Greece's banks which saw heavy withdrawals on Saturday on top of the billions that have flowed out in recent weeks, but he said the banks should remain open. "This smooth transition will require that everybody does their job properly, and that includes the central bank, to keep the banks open and to keep the monetary system functioning as it should," he said. (Reporting by Renee Maltezou, Writing by Deepa Babington; Editing by Andrew Heavens)