Greek parties delay bailout talks despite EU threats

Demonstrators from the communist-affiliated trade union PAME march by the parliament in protest against the new austerity measures in Athens February 7, 2012.

ATHENS (Reuters) - Greek political parties delayed yet again on Tuesday making the tough choice of accepting painful reforms in return for a new international bailout to avoid a chaotic default, seemingly deaf to EU warnings that the euro zone can live without Athens.

With a series of deadlines come and gone, leaders of the three parties in the coalition of Prime Minister Lucas Papademos postponed what was supposed to be a crunch meeting until Wednesday.

On a day when protesters burned a German flag in Athens, Chancellor Angela Merkel tried to ease growing tension by promising she would not try to force Greece out of the euro. But the Dutch prime minister said the currency bloc could take a Greek exit in its stride.

One party official blamed Tuesday's delay, which is likely to enrage euro zone leaders desperate to tie up the 130 billion euro rescue after months of argument, on missing paperwork - the same reason given when the meeting was postponed from Monday to Tuesday.

"The reason is that the political leaders will not have the time to assess the measures in the bailout," said the party official, who declined to be named.

The heads of the conservative, socialist and far-right parties had yet to receive the draft agreement with the European Union and IMF only half an hour before the 1900 GMT scheduled start of the meeting on Tuesday.

"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," far-right LAOS leader George Karatzaferis said. "There is time. When it comes to future of the country, we will find the time."

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 labor conditions!"

Deadlines are rapidly losing any 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.

A CHALLENGE TO MERKEL

Such dithering is a challenge to the authority of 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.

With Greek resentment increasingly focusing on Germany, Merkel tried to calm the atmosphere on Tuesday, warning 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."

Such comments will hurt Greeks, who have a deep fear of being cast adrift from the euro zone and left with a new national drachma currency which would probably dive in value.

Papademos, a technocrat parachuted in to lead the Greek government late last year, has been trying to persuade the party leaders to accept the EU/IMF conditions.

With elections likely in April, the party political leaders - who Europe insists must all sign up to the austerity program - face an obvious incentive not to heap more misery on their voters. But if they do not, an unruly default looms.

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 in value - so Athens can get rescue funds before March 20 when it has to meet 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 the level of cuts on top-up, supplementary pensions still remained.

"DON'T BOW YOUR HEADS!"

The funds come at the price of deeply unpopular wage and spending cuts that have infuriated ordinary Greeks struggling through the country's fifth year of recession.

Tuesday's strike closed tourist sites and the country's biggest port, and disrupted public transport. Scuffles broke out as protesting strikers tried to climb steps leading to parliament, chanting: "Don't bow your heads, show resistance!"

Riot police rushed to block their way as some protesters sprayed red paint on the steps and a wall next to the tomb of the unknown soldier, which commemorates the fallen in past Greek campaigns. Other protesters burned a German and a Nazi flag.

Ceremonial guards in traditional Greek kilts, a top Athens tourist attraction, were evacuated and the protesters were pushed back on to the adjacent Syntagma Square, where riot police created a defensive line.

However, the turnout was noticeably smaller than at other protests in recent months, with heavy showers dampening the marchers' spirits.

One civil servant watching the protests expressed a weary anger at the austerity imposed already, which has almost halved her monthly pay to 900 euros, and higher taxes.

"I wouldn't mind paying for the next two years if I knew austerity would take us somewhere," said 32-year-old Leto Papadopoulou. "But this crisis seems endless. In 10 years from now, I will be a lost case for the labor market."

($1 = 0.7646 euros)

(Additional reporting by Ingrid Melander, Yannis Behrakis, Karolina Tagaris and Harry Papachristou in Athens, Gareth Jones, Stephen Brown and Andreas Rinke in Berlin and Sara Webb in Amsterdam; Writing by David Stamp and Deepa Babington; Editing by Mike Peacock)