Greece's political leaders on Thursday agreed to a fresh series of severe spending cuts, but the deal, strung with high drama and suspense, fell short of securing a new $170-billion bailout from foreign creditors that is needed to stave off a chaotic default.
Instead, European finance ministers meeting in Brussels piled more pressure on near-bankrupt Greece to prove that it can deliver on promises to slash public spending and drastically rein in its debt, currently hovering at about 160% of gross domestic product.
"Despite the important progress achieved over the last days, we did not have all the necessary elements on the table to take decisions today," said Jean-Claude Juncker, prime minister and finance minister of Luxembourg.
He said European finance ministers would resume their review of the Greek proposals Wednesday, provided the latest batch of budget cuts were ratified by the Greek Parliament and further explanation was given on how Athens planned to cover more than $400 million in budget gaps.
"The agreement, as far as I understand it," German Finance Minister Wolfgang Schaeuble said before the Brussels talks, "is not at a stage that can be signed off."
The refusal to approve the new aid package signaled Europe's growing frustration with Greece two years after an initial $150-billion rescue plan was patched together. And with elections looming here this spring, the International Monetary Fund also said Thursday that it was seeking written assurances from political leaders in Athens that they would comply with the list of concessions agreed to this week.
Without international aid, Greece could default as early as next month when a $19-billion bond redemption matures March 20. That, in turn, could rattle global financial markets and push other troubled economies such as Spain and Italy to follow suit.
For weeks, Greek Prime Minister Lucas Papademos has been struggling to reach agreement with private investors on a complex bond-swap deal that would restructure Greece's $500-billion debt. He also has been trying to meet European and IMF demands for budget cuts and structural reforms in order to secure a second $170-billion bailout promised to Athens in October.
But recent reports by a team of debt inspectors of gaping budget deficits and lagging structural reforms have enraged the top European paymasters — Germany and France — which forced Athens' political leaders to accept further austerity measures in a controversial deal reached early Thursday.
That agreement followed days of negotiations over creditors' demands, including a 22% cut in wages to bring down deficit levels. The European Union and the IMF insist that the cuts are necessary for Athens to stay in compliance with terms of its 2010 bailout.
The talks on cutting Greece's budget had hit a major snag Wednesday over moves to slash $800 million from pensions, with the strongest objections coming from the leader of the conservative New Democracy party, Antonis Samaras, who argued that such cuts would only deepen Greece's already painful recession.
An official in the prime minister's office who spoke on condition of anonymity said that Papademos, Samaras and other party leaders reached a compromise under which half of the $800 million would be taken from pensions and the remaining half from other sources, such as Greece's defense budget.
On Thursday, European finance ministers said they wanted further clarifications on those cuts, plus Parliament's ratification of the new austerity package, before they would permit the latest bailout package.
With a recession biting deep into the country's anemic economy and the unemployment rate topping 20.9% in November, according to figures released Thursday by the state statistical office, labor unions have called for a 48-hour strike, starting Friday, to protest the austerity measures. Deputy Labor Minister Yannis Koutsoukos, a socialist, resigned over the new cuts, saying they would "wreak more pain for people."
A meeting of the Cabinet council and a parliamentary vote on the austerity measures are to take place over the weekend. Ratification of the proposals appeared certain because the coalition government controls 252 of the 300 seats in Parliament, and a simple majority is needed for the highly unpopular measures to become law.
"This is it," Greek Finance Minister Evangelos Venizelos told reporters in Brussels. "Between now and next Wednesday, we must decide whether our country's salvation will come from within [the Eurozone].
"If that is the case, then we must do whatever we have to. If not, then we have to make that clear. Time's up."
Carassava is a special correspondent.