The Associated Press February 15, 2012, 2:14PM ET

Euro countries voice doubts over Greek bailout

Some eurozone countries have strong doubts over whether a second massive bailout can ultimately save Greece, several policymakers and officials fear, even as the country rushed to meet tough conditions to qualify for the euro130 billion ($170 billion) rescue.

The doubts stem from growing concerns that Greece's economic problems are deepening and that the country's political leaders may not stick to the budget-cutting and reform promises they're making to receive the rescue. The concerns help explain why, after almost two years of frantic efforts to save Greece from bankruptcy, there is still wrangling over what needs to be done to secure Greece's position in the euro currency union and its economic future.

Circumstances have changed since the eurozone agreed on a first euro110 billion rescue for Greece in May 2010.

Some politicians -- especially in rich euro countries like Germany, the Netherlands and Finland -- have grown tired of Greece repeatedly missing budget targets and failing to implement promised cuts, reforms and sales of state assets. There are also concerns that the second, euro130 billion ($170 billion) bailout may not be enough to lift Greece out of its steep recession -- its economy shrank 7 percent in the final quarter of 2011 from a year earlier.

"There are many in the eurozone who don't want us any more," Greece's Finance Minister Evangelos Venizelos told the country's president, Karolos Papoulias, during a meeting to inform him of the latest developments.

Greece, Venizelos added, had to persuade the skeptics that the country could stay in the currency union and regain lost ground in reforming its economy.

"We are facing a situation that is particular because we are constantly being given new terms and conditions," the finance minister said.

Venizelos' negative assessment was backed by an official in Brussels.

"There is resentments, mistrust, really bitter debate," said a European official, who has been briefed on recent talks between eurozone finance chiefs. The official was speaking on condition of anonymity because of the sensitivity of the topic.

A number of politicians believe that the eurozone is now strong enough to handle a default by Greece -- one of the smallest economies in the currency union, responsible for only about 2 percent of its economic output -- than it would have been two years ago. Others, however, are concerned that the shockwaves of a disorderly Greek default would be felt across the rest of Europe and the world's financial markets.

Greece passed a new austerity bill through Parliament this week with spending cuts and reforms demanded by its international creditors before Greece can receive the vital rescue loans. Greece is running out of time for the deal, as it faces a euro14.5 billion bond redemption in March it cannot afford. The second bailout is also tied to a euro100 billion debt-relief deal with bondholders, under which the private creditors will swap the bonds they hold for ones with lower values and longer maturity dates.

In Berlin, German Chancellor Angela Merkel's spokesman, Steffen Seibert, sharply rejected a question about market rumors that Germany has decided a Greek bankruptcy is acceptable.

"I can say very clearly for the German government that these rumors are wrong -- there is no such decision by Germany," he said.

Germany was working with others in Europe to find "a practicable way out of the crisis for Greece", he added.

However, tensions and resentment between Athens and its creditors remain. A meeting between eurozone finance ministers planned for Wednesday was canceled after Athens failed to provide details on how to save an extra euro325 million ($428 million) as well as written assurances by main political party leaders that they will stick to a second bailout program after elections expected in April.

The ministers were holding a conference call instead, and are to meet on Monday.

Officials said the euro325 million ($428 million) should be secured by the end of Wednesday, while both Socialist party head George Papandreou and Conservative party leader Antonis Samaras had sent letters by Wednesday afternoon.

But the European official briefed on recent talks said even those assurances may not be enough.

"People don't trust the Greeks and that is the main element," he said.

Adding to that are concerns that the upcoming election campaign will forcibly slow down or hinder implementation.

At their most recent get-together last week, finance chiefs attacked their Greek colleague, with Finland's Finance Minister Jutta Urpilainen chewing Venizelos out in front of the cameras over a documents she said still had not been signed.

The perceived humiliation of Greece and the hardship brought on by four years of recession have often sparked violent protests in Athens and other Greek cities. Resentment has grown against Germany and the EU, which are seen as imposing unnecessarily painful cuts.

Papoulias, who holds a largely ceremonial role, lashed out on Wednesday.

"We all have an obligation to put our backs into it to get through this crisis. I will not accept my country to be disparaged by Mr. Schaeuble," he said during an event at the defense ministry, referring to the German finance minister who has taken a particularly hard line recently against Greece.

"I do not accept it as a Greek," Papoulias said. "Who is Mr. Schaeuble to disparage Greece? Who are the Dutch? Who are the Finns? We always had the pride to defend not just our freedom, not just our country, but the freedom of Europe."

Politicians in Athens and Brussels have warned about the negative consequences of a default.

"We do not have a choice between a pleasant or unpleasant option -- but a choice that is between either unpleasant or even more unpleasant solutions," Venizelos said.

But there are still doubts as to whether the bailout will work.

When eurozone leaders tentatively agreed on more aid last October, they pinned down key parameters: By 2020, Greece's debt has to decline to 120 percent of economic output -- the maximum they said was sustainable -- from more than 160 percent currently.

But even with the bailout and the bond swap, the 2020 target could still be missed. Last month, an EU official said a gap of some euro15 billion ($19.6 billion) remained. There are hopes that the European Central Bank, which also holds a substantial amount of Greek bonds, can help fill that gap, but so far the ECB has remained vague on whether and how it would do so.

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Becatoros reported from Athens, Greece. Derek Gatopoulos and Eftehia Katsareas in Athens, Geir Moulson in Berlin and Raf Casert in Brussels contributed.


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