EU Having Second Thoughts About Another Greek Bailout

Some eurozone countries have strong doubts over whether a second massive bailout can actually save Greece, officials said Wednesday, even as Athens rushed to meet tough conditions to qualify for the €130 billion ($170 billion) rescue.

The wrangling over Athens’ aid money comes after almost two years of frantic efforts to save Greece from bankruptcy and secure its place in the 17-country currency union.

But circumstances have changed since the eurozone agreed on a first €110 billion rescue for Greece in May 2010.

Several politicians – especially in more stable 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.

Some policymakers are optimistic that the eurozone is  strong enough to handle a default by Greece, which is one of the smallest economies in the currency union, responsible for only about 2 percent of its economic output. Other lawmakers, 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.

“There are many in the eurozone who don’t want us anymore,” 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.

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.

German Chancellor Angela Merkel

“I can say very clearly for the German government that these rumors are wrong – there is no such decision by Germany,” he said, adding that Germany is working with others in Europe to find “a practicable way out of the crisis for Greece” with the second rescue package and a bond swap with private creditors that seeks to cut Greece’s debt by about €100 billion ($130.92 billion).

However, tensions between Athens and its creditors remain. A meeting between eurozone finance ministers planned for Wednesday was canceled Tuesday night after Athens failed to deliver in time on demands made the previous week.

Eurogroup chairman Jean-Claude Juncker said he was still missing details on how to save an extra €325 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 for April. The ministers will hold a conference call Wednesday evening instead, and meet next Monday.

Officials said the €325 million ($428 million) should be secured by the end of the day. On the written assurances, Socialist party head George Papandreou sent his letter Tuesday night, officials said. Conservative party leader Antonis Samaras sent his Wednesday.

“We will remain committed to the program’s objectives, targets and key policies,” wrote Samaras, whose party is most likely to win elections expected in April. However, he said policies might have to be modified in order to help the economy recover from the deep recession it is currently in, although he underlined these would not change the ultimate targets in reforming the economy.

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.

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.

The Associated Press contributed to this report.