Greece Buys More Time Again over Austerity Cuts

(Reuters) - Greek parties will try yet again to strike a reform deal in return for a new international rescue to avoid a chaotic default, after a string of delays which have prompted some EU leaders to warn that the euro zone can live without Athens.

As one deadline after another has come and gone, leaders of the three parties in the coalition of Prime Minister Lucas Papademos postponed what was supposed to have been a crunch meeting on Tuesday until the following day.

Papademos - a technocat parachuted in last November to secure the new 130 billion euro ($172bn) rescue from the IMF and EU - is trying to persuade the party leaders to accept austerity and reform measures which are likely to prove highly unpopular with an angry and despondent Greek electorate.

Facing a parliamentary election possibly as early as April, coalition leaders showed little sense of urgency, despite demands from euro zone leaders to make up their minds fast because Greece faces bankruptcy next month unless it gets the rescue funding to meet big debt repayments falling due.

We can't say a plain yes or no unless we have assurances from the relevant authorities of the state that these actions are constitutional and will lead the country out of the crisis, said George Karatzaferis, who leads the far-right LAOS party.

There is time. When it comes to future of the country, we will find the time, he told reporters.

One party official blamed Tuesday's delay on missing paperwork, the same reason given when the meeting was postponed from Monday to Tuesday.

The heads of the conservative New Democracy, PASOK socialists and LAOS had yet to receive the draft agreement with the EU and IMF only half an hour before they were supposed to meet Papademos on Tuesday, he said.

Party leaders have hesitated to accept the tough terms of the deal, which are certain to mean a big drop in living standards for many Greeks.

Adding to the pressure, unions staged a 24-hour strike on Tuesday, and protesters tussled with police outside parliament, chanting: No to mediaeval labour conditions!

Deadlines are losing significance as one after another passes. Last weekend, Finance Minister Evangelos Venizelos said a deal had to be done by Sunday. Then the parties sailed past a Monday deadline to give their response to the EU, promising that Tuesday would be the day for decisions.

Such apparent dithering is a challenge to the authority of German Chancellor Angela Merkel, whose government is a major funder of Greek bailouts. She said on Monday that time is of the essence and expressed bewilderment about what the repeated delays could achieve.

UNFORESEEABLE CONSEQUENCES

However, Greek resentment is increasingly directed at Germany, and striking protesters burned a German and Nazi flag in central Athens on Tuesday.

Merkel tried to calm the atmosphere, saying that forcing Greece to abandon the euro would have unforeseeable consequences.

I will have no part in forcing Greece out of the euro, she said in response to a question from a Greek student at a meeting with young people in a Berlin museum.

Euro zone countries cannot be forced out of the currency bloc by their peers. But some policymakers in the bloc are starting to say in public what they have been saying in private: that if Athens doesn't accept the terms, they might not do much to prevent Greece falling out of its own accord.

Dutch Prime Minister Mark Rutte said the euro zone could live without Greece if it didn't keep its side of the bargain.

We are currently so strong in the rest of the euro zone, in the countries who have the euro, that we can handle an exit of Greece - a Greece which runs into serious trouble, Rutte told Dutch public broadcaster NOS.

They really have to implement all the measures they have promised to take. If that doesn't happen we can't help them, he added. European Commissioner Neelie Kroes made similar remarks.

Such comments awaken deep fears among Greeks that they will be cast adrift from the euro zone and left with a new national drachma currency which would probably dive in value.

Euro zone officials say the full package must be agreed with Greece and approved by the euro zone, European Central Bank and International Monetary Fund before February 15.

This is to allow time for complex legal procedures involved in a bond swap deal - under which the value of private investors' holdings of Greek debt will be cut radically - so Athens can get rescue funds before March 20 when it has to meet the heavy debt repayments or suffer a chaotic default.

After days of negotiations, officials said sticking points on cutting the minimum wage and scrapping holiday bonuses appeared to have been largely resolved but problems with the level of cuts on top-up, supplementary pensions still remained.