Greece let yet another deadline slip on Monday for responding to painful terms for a new EU/IMF bailout, as German Chancellor Angela Merkel made clear Europe's patience is wearing thin over drawn-out negotiations among its feuding political leaders.
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.
Continue Reading Below
Merkel turned up the heat, saying Athens had to come to terms with the "troika" of lenders - the European Commission, European Central Bank and IMF - to get the funds it needs to meet big debt repayments in March.
Greek political leaders, positioning themselves for a likely general election in April, have baulked at accepting another package of deeply unpopular wage and pension reductions, job cuts and tougher tax enforcement measures.
Speaking in Paris alongside French President Nicolas Sarkozy, Merkel said she wanted quick action from Athens.
"We want Greece to stay in the euro," she told a news conference. But she added: "I want to make clear once again that there can be no deal if the troika proposals are not implemented. They are on the table, time is of the essence. Something needs to happen quickly."
Merkel, whose country is Europe's main paymaster, made clear that the deal affected not only Greece but the wider currency bloc, which fears that a default would hit much larger economies such as Spain and Italy.
"A lot is at stake for the entire euro zone," she said.
Earlier, a Greek government official denied that the three parties in the coalition government had been given an ultimatum to respond on Monday, after weeks of arguing over another wave of austerity in return for the 130 billion euro bailout.
In Brussels, the European Commission took issue with this. "We have gone beyond the deadline already," Commission spokesman Amadeu Altafaj told a news briefing, adding that the Greek authorities had still to take the necessary decisions.
Challenged about the troika's demand to cut Greece's minimum wage, he said it averaged 871 euros a month, compared with 748 euros in Spain, which is not under an EU/IMF rescue programme, and 566 euros in Portugal, which has received a bailout.
Talks on the bailout have dragged on for weeks.
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). On Monday he said this deadline had slipped to Tuesday.
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, and the Commission spokesman said it would be held only when Greece had made its commitments to the deal.
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 mid-March to meet big debt repayments but tempers are rising in the European Union over what it sees as Greek dithering on implementing reforms.
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 6.6 percent in the afternoon 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 nationalisation," said Natasha Roumantzi, head of analysis at Piraeus Securities.
The euro 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.
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.
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.