Greece Lets Another Deadline Slip in Bailout Poker

Greece let yet another deadline slip on Monday for responding to painful terms for a new EU/IMF bailout as patience in Brussels wore thin over drawn-out negotiations among its feuding political leaders.

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Failure to strike a deal to secure the 130 billion euro ($170 billion) rescue risks pushing Athens into a chaotic debt default which could threaten its future in the euro zone.

The leaders of France and Germany told Greece on Monday time was running out in talks on a broad debt restructuring deal and Athens would only get bailout money from Europe if it lived up to its promise to deliver economic reforms in return.

"We want this accord," French President Nicolas Sarkozy said.

"Greece's leaders have made commitments and they must respect them scrupulously ... Europe is a place where everyone has their rights and duties. Time is running out, it needs to be concluded, it needs to be signed."

He and German leader Angela Merkel held a news conference after an annual meeting of top government ministers from both countries where they kept pressure up on Greece to meet reform suggestions set out by the European Commission, European Central Bank and International Monetary Fund, known as "the troika".

"Panos Beglitis, spokesman of the PASOK socialist party, said on Sunday that leaders of the three parties backing technocrat Prime Minister Lucas Papademos' government had to give their responses in principle by noon (1000 GMT).

However, a government official denied that the parties had been given an ultimatum to respond on Monday.

Asked whether the parties had to respond in time for a Euro Working Group meeting of finance ministry officials in Brussels, the Greek official said: "No, there is no deadline."

He said the entire Greek side had to agree terms of the rescue, which would be the second for Athens since 2010, with international lenders before the next meeting of the Eurogroup of euro zone finance ministers.

"The only deadline is to have a staff agreement for the second bailout and the agreement of the political leaders before Eurogroup," said the official, who requested anonymity.

No date has yet been set for the Eurogroup meeting, although it is expected this week.

In Brussels, frustrated EU officials said Greece was already in "overtime" after failing to clinch an agreement at the weekend on a package incuding wage and pension reductions, job cuts and tougher tax enforcement measures.

"It will be very bad if there is no white smoke from Athens today," said one euro zone government source.

"We have already missed deadlines. In order to prepare the fresh tranche of money and reschedule debt in the first half of March, a whole series of technical steps must be taken. We need a decision now to put the mechanism of rescheduling in place."

Beglitis said the deadline had merely slipped to Tuesday due to the changing timetable of euro zone meetings.

Leaders of PASOK, the conservative New Democracy and the far-right LAOS party - who may face an angry electorate in parliamentary polls as soon as April - still have to agree on unresolved problems.

These include labour market reform and shoring up domestic banks.

Greece needs the bailout money by March to meet big debt repayments but tempers are rising in the European Union over what it sees as Greek dithering on implementing reforms.

Bank Hopes

Papademos said after five hours of talks on Sunday that party chiefs had agreed measures including wage cuts and other reforms as part of spending cuts worth 1.5 percent of gross domestic product.

Hopes rose on Monday that they had also made progress on recapitalising domestic banks, which are up to their necks in Greek government bonds now worth a fraction of their face value.

Greek bank stocks were up 8.8 percent at midday on hopes that lenders would be recapitalised without being nationalised after a debt swap under the latest bailout deal, which will radically cut the value of their bond holdings.

"Banks are concerned with the way they will be recapitalised, so that they remain independent ... It seems it will be done through a combination of instruments, which will reduce the risk of their nationalization," said Natasha Roumantzi, head of analysis at Piraeus Securities.

The euro

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[EUR=X  Loading...      ()   ] fell broadly on investor concern that the parties had yet to sign off on the terms of a new bailout with a deadline imminent, keeping alive the risk of a messy default which could rock the currency bloc.

The single currency slid by 0.6 percent to stand at $1.3070.

Talks on the bailout have dragged on for weeks.

Worn Down

Greeks have been worn down by a deep recession, now in its fifth year, and wave after wave of austerity measures imposed under the first bailout.

Alarmed by the prospect of yet more budget cuts, Greece's two main trade unions said they would call a 24-hour strike for Tuesday in protest against policies they say have only driven the economy into a downward spiral.

"Despite our sacrifices and despite admitting that the policy mix is wrong, they still ask for more austerity," Ilias Iliopoulos, secretary general of public sector union ADEDY, told Reuters.

ADEDY and its private sector sister union GSEE, which will join Tuesday's strike, represent about 2 million workers or roughly half the country's workforce.

Leftist and communist-affiliated groups will rally at around 1600 GMT on Monday to march to parliament.

With Greece facing 14.5 billion euros of debt repayments in March, a bill it cannot meet without further bailout funds, the stakes could not be higher.

Officials have emerged increasingly despondent after each round of talks, complaining that the troika of European Central Bank, European Commission and International Monetary Fund was refusing to yield on demands to cut the minimum wage, axe holiday bonuses and fire public sector workers.

New Democracy and LAOS in particular have staunchly opposed further wage and spending cuts, arguing they risk precipitating an even deeper recession and imposing more pain on Greeks.

The slow progress has angered Greece's European partners.

Euro zone officials say finance ministers told Greece on Saturday it could not go ahead with an agreed deal to restructure privately held debt until it guaranteed it would implement reforms.

"There is a great sense of frustration that they are dragging their feet," one euro zone official said.