Eurozone leaders 'call off Greece crisis talks'

Gavin Hewitt: "EU officials are playing it tough... For the moment this second bailout is on hold"

The head of the eurozone countries has downgraded a eurozone finance ministers meeting on Wednesday, saying Greece has not yet given the necessary assurances about its austerity plan.

Ministers, who had demanded Greece find an extra 325m euros of savings, had been set to meet in Brussels.

But Eurogroup President Jean-Claude Juncker said the talks would be replaced by a conference call.

He said technical work with Greece was still needed "in a number of areas".

Finance ministers had not received assurances from leaders of Greek political parties on a programme of proposed cuts, Mr Juncker was quoted as saying by Reuters news agency.

He said that "against this background, I have decided to convene ministers to a conference call tomorrow in order to discuss the outstanding issues".

As well as 17 ministers from nations that use the euro, the president of the European Central Bank Mario Draghi and the Commissioner for Economic and Monetary Affairs, Olli Rehn, had also been due to attend the meeting.

Mark Lowen, the BBC's Athens correspondent, says the Greek Prime Minister's office confirmed that the face-to-face meeting had been called off.

'Harsh'

The latest 130bn-euro bailout ($169.5bn, £108.7bn) was agreed in principle by EU leaders in October, conditional on Greece adopting further measures to cut its deficit and restructure its economy.

Analysis

It's now a question of who will blink first.

Greece - which has to receive this second multi-billion Euro bailout if it's not to default and, it's assumed, therefore leave the euro.

Or the EU - which is demanding that Greece comply with every aspect of the bailout agreement before the money is handed over - but which is also publicly desperate to avoid the chaos it's believed would follow a Greek exit from the single currency.

Bearing in mind the difficulties of selling more austerity to a nation already on its knees, it is by no means certain that the bailout will be granted.

If it is not, Greece will not be able to meet its debt repayments, and the economic uncertainty for the eurozone, Europe and indeed the world will intensify.

On Sunday, Greek MPs approved extra cutbacks, but parties had to expel more than 40 deputies for failing to back the bill.

Thousands protested in Athens, where there were widespread clashes and buildings were set on fire. Violent protests were reported in cities across the country.

"As time has gone on more and more people believe that austerity measures can't be met because the economy is doing too badly and that they are far too harsh especially for the working and middle classes in the private sector." said Nick Malkoutzis, Deputy Editor, of Kathimerini English Edition.

"The feeling is they are being made to pay for failure to reform the public sector." he said.

There is pressure on Greece to make progress, as the country will not be able to pay debts due on 20 March unless it can qualify for more bailout funds by satisfying its European partners.

By that date Greece needs to repay 14.5bn euros to lenders.

When and if eurozone ministers are convinced Greece is making progress on cuts, and if the German parliament agrees to the bailout (as it must under national law), then any new bailout could be signed off in early March.

But there have been warnings that politicians in Germany, Europe's biggest economy, may be losing patience.

Athens protests Thousands protested against the latest round of Greek austerity measures

"Given the increasing hard line we have seen out of German policymakers over the past few days, you would wonder if Germany is trying to push Greece out [of the euro]," Michael Hewison of CMC Markets told the BBC.

Meanwhile, an official report on Tuesday showed that the decline of the Greek economy accelerated in the final three months of 2011.

The estimate showed that, compared with a year earlier, Greek GDP contracted by 7% in the fourth quarter of 2011.

That is an acceleration from the 5% contraction in the third quarter.

The report also shows that the Greek economy shrank 6% last year, an increase on earlier estimates and the fifth year of recession.

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