Can Greece play an EU hardball?

Tensions within the eurozone are growing amid fears that Greece's promised reforms won't be implemented after its April elections, prompting calls for a delayed bailout.

Tensions between Athens and the rest of Europe have risen to dangerous levels, with several European countries now pushing to delay Greece’s second €130 billion bailout package until they see the outcome of Greek elections in April.

Germany, Finland and the Netherlands – all of which hold triple-A credit ratings – have become increasingly frustrated by the posturing of Greek politicians and have hardened their attitude to the debt-strapped country.

There is now growing support for the idea of delaying Greece’s second bailout package until after the country’s April elections. Instead, they would give the country a short-term bridging loan that would enable it to avoid defaulting on a €14.5 billion debt repayment that is due next month.

German finance minister Wolfgang Schuble gave voice to his frustration in an interview on German radio overnight. "When you look at the internal political discussions in Greece and the opinion polls, then you have to ask who will really guarantee after the elections... that Greece will stand by what we are now agreeing with Greece," he said.

It’s also clear that European leaders are no longer as terrified by the prospect of a Greek debt default, because they believe that the European Central Bank has managed to settle markets by flooding the region’s banks with low-cost funds. According to Dutch Finance Minister Jan Kees de Jager, eurozone countries no longer have their backs against the wall regarding Greece, because of the broader financial buffers that have been built up in the past year.

But Greek Finance Minister Evangelos Venizelos lashed out at this new hard-line attitude from Europe, warning European leaders that they were "playing with fire”.

"We are faced with an extraordinary situation. As we continue, new terms and conditions are being set," he said. "There are many in the eurozone that don't want us anymore."

The rising tensions come even though the leaders of Greece’s main political parties have given written undertakings that they will stick to the terms of the country’s new bailout program.

In his letter to eurozone officials, which was written in Greek and English, Antonis Samaras, who heads the conservative New Democracy party, pledged that if his party won the next election, "we will remain committed to the program’s objectives, targets and key policies”. But Samaras, who is widely expected to be Greece’s next prime minister, warned that "certain modifications could be necessary to ensure the program was fully implemented”, and he called on Greece’s creditors to give priority to boosting Greece’s economic growth.

According to the French newspaper, Le Monde, there are other issues that have to be resolved before Greece’s next bailout can proceed. Athens has been asked to explain how it will make €325 million in extra savings to cover a gap in its 2012 budget, but has so far failed to provide a convincing explanation. Athens has indicated that a decision on the extra cost-cutting will be taken "in coming days”.

According to Le Monde, there is also a continuing disagreement over the extent to which the European Central Bank will participate in Greece’s debt restructuring. What’s more, there is also a debate over whether it is necessary to stick to the objective of reducing Greece’s debt burden to 120 per cent of GDP – from 160 per cent at present – or whether a higher target, such as 125 per cent, might be acceptable.

The "troika” – officials from the ECB, the European Union and the International Monetary Fund – has not yet sent its report on Greece’s debt sustainability to eurozone finance ministers.

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