Greek leaders blow chance of quick EU bailout approval (Reuters)

BRUSSELS/ATHENS (Reuters) ? Euro zone finance ministers have dropped plans for a special face-to-face meeting on Wednesday on Greece's new international bailout, saying political party chiefs in Athens had failed to provide the required commitment to reform.

A day before euro zone finance ministers had been due to meet in Brussels to consider the bailout, the man most likely to be Greece's next prime minister had yet to sign a commitment to implement the austerity measures demanded by the EU and IMF.

Likewise, the cabinet had yet to fill a 325 million euro ($427 million) gap in the budget cuts promised for 2012, even though the ministers of the Eurogroup had told Athens that they needed a complete package of promises and signed undertakings.

With the European Union's patience with Greece close to breaking point, Eurogroup Chairman Jean-Claude Juncker downgraded Wednesday's talks to a telephone conference call.

That appeared to kill any chance that the Eurogroup would approve on Wednesday the 130 billion euro bailout, funds from which Greece must start getting by next month to avoid a messy bankruptcy. It is due to hold a regular meeting on February 20.

Juncker said he was awaiting written undertakings from Greek party leaders on pushing through with the austerity package of pay, pension and job cuts - which parliament passed early on Monday as rioters wrecked buildings across central Athens.

"I did not yet receive the required political assurances from the leaders of the Greek coalition parties on the implementation of the program," he said in a statement.

A source familiar with the bailout negotiations said conservative leader Antonis Samaras had yet to sign the commitment to implement the deeply unpopular austerity package, a condition set by the EU/IMF lenders who are weary of broken Greek promises on economic reform and budget cuts.

"So far Samaras has not given a letter of commitment and this is a problem," the source told Reuters on condition of anonymity. The New Democracy party of Samaras declined comment.

A government source said Samaras would provide the undertaking on Wednesday morning. If he does, he will be sticking to a pattern among Greek politicians of working right up to deadlines or beyond, infuriating EU leaders.

This practice of keeping everyone in suspense until the last minute appears to have cost Greece the full Eurogroup meeting. Time is running out as it faces a chaotic default if it cannot meet 14.5 billion euros in debt repayments due on March 20.

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With New Democracy well ahead in opinion polls, Samaras is frontrunner to become the next prime minister. When parliament debated the austerity package he indicated that he would try to renegotiate the terms of the bailout, further sowing doubt in the minds of European leaders.

A source at the PASOK socialist party, the other coalition party, said its leader George Papandreou had already provided a signed undertaking.

Greece's cabinet negotiated late into Tuesday evening on solving the other hitch with Brussels, the 325 million euro hole in the 3.3 billion euros of extra budget cuts which the government has promised for this year.

All this was played out as Greece's downward economic spiral accelerated. Data on Tuesday showed that economy shrank seven percent in the fourth quarter of last year, even more than the five percent contraction of the third quarter.

Greece is now in its fifth year of recession and is well on its way to suffering one of the biggest slumps of modern history. Gross domestic product has contracted 16 percent from its peak and the austerity will only make that worse.

Prime Minister Lucas Papademos has warned that failure to back the bailout would consign Greece to economic catastrophe.

But with many Greeks suffering huge cuts in their living standards and young people burning and wrecking almost 100 Athens buildings in one night on Sunday, some people believe the catastrophe is already underway.

"On the current path - which is not sustainable in my view - we may very well see Greek GDP go down 25-30 percent, which would be historically unprecedented. It's a disastrous crisis for them," said Uri Dadush, at the Carnegie Endowment think tank in Washington.

That would put Greece in the same league as the United States, where the economy shrank 29 percent during the Great Depression.

"They're suffering. It's nasty," said Mark Weisbrot, co-director of the Center for Economic and Policy Research, another in Washington think tank.

"If you could say with a reasonable probability that the worst was over, then that would be different. But you can't say that. They're in for a long nightmare." ($1 = 0.7616 euros)

(Additional reporting by Renee Maltezou in Athens, Alan Wheatley and Scott Barber in London; Writing by David Stamp; Editing by Myra MacDonald)

Source: http://us.rd.yahoo.com/dailynews/rss/business/*http%3A//news.yahoo.com/s/nm/20120214/bs_nm/us_greece

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