UPDATE 1-Greeks seek elusive bailout deal, EU tempers fray

Wed Feb 8, 2012 3:14am EST

* EU officials say package must be agreed by mid-month

* Party official blames missing paperwork for fresh delay

* Merkel promises not to force Greece out of the euro zone

* Dutch PM says euro zone can live with Greek exit

By Renee Maltezou and George Georgiopoulos

ATHENS, Feb 8 (Reuters) - Greek parties will try again on Wednesday to agree a reform deal in return for a new international rescue to avoid a chaotic default, after delays prompted some EU leaders to warn that the euro zone can live without Athens.

One deadline after another has come and gone. Leaders of the three parties in the coalition of Prime Minister Lucas Papademos postponed on Tuesday what had been billed as a crunch meeting because of missing paperwork, according to one official.

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

Papademos is expected to meet the leaders at about 12:30 p.m. (1030 GMT) to discuss the draft deal struck with the IMF and EU, a government source said. Most points have been settled but the leaders would be asked to make a choice on options on some fiscal issues, he added.

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

"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 the future of the country, we will find the time," he told reporters on Tuesday night.

Some financial markets showed hope that Greece would pull off the bailout deal. Prices of German government bonds, which investors buy at times of uncertainty for their perceived safety, fell on Wednesday. The euro also hit a fresh two-month high versus the dollar.

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 Feb. 15.

MISSING PAPERWORK

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

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.

An opinion poll on Wednesday showed that PASOK, which ruled Greece until the government of George Papandreou collapsed last November, has most to fear when elections are held to replace the interim national coalition of Papademos.

The monthly survey by Public Issue for Kathimerini newspaper showed support for PASOK had collapsed to eight percent from the nearly 44 percent it took when it returned to power in 2009.

Austerity imposed by the coalition has hit traditional PASOK voters hard, many of whom have turned their backs on all the government parties. Support for the Democratic Left, which refused to join the coalition, surged to 18 percent.

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. 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 the delays.

UNFORESEEABLE CONSEQUENCES

Greek resentment is increasingly directed at Germany. 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 are starting to say in public what they have been saying in private: that if Athens fails to 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 did not 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.

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.

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