Greek shadow over euro darkens

(BRUSSELS) - It won't leave, it won't be kicked out and yet it can't be trusted -- the budgetary mess Greece has landed itself in has never looked more serious for Europe's core continental economy.

The 16 countries at the heart of the European Union, those who share the decade-old euro currency and whose influence, eventually, is supposed to suck in the remaining bloc members and any newcomers, are deeply worried.

German Chancellor Angela Merkel broke from standard discourse this week to articulate the depth of the strain when she said the Greek crisis was placing the ties that bind the eurozone under "huge, huge pressures."

Warning of a "very difficult" adolescence ahead -- although she subsequently said she meant no direct criticism -- Merkel's pessimism set a sombre tone for euro finance ministers gathering in Brussels on Monday.

An emergency action plan was unveiled in Athens on Thursday aimed at curbing the debt and deficit that has undermined Greece's credibility on financial markets and unnerved its partners.

The program, submitted to Brussels watchdogs on Friday, will essentially involve pushing Greece to do even more, the euro area's political figurehead Jean-Claude Juncker said on Friday.

"It would be false to let Greece believe the other eurozone countries will help it resolve its problems," the Luxembourg premier contended, noting that a bailout is legally impossible under EU treaties.

European Central Bank head Jean-Claude Trichet on Thursday dismissed the notion that Greece could leave the eurozone because of its debt crisis but told Athens it had to get its finances in order.

Trichet said suggestions that Greece might resign or be expelled from the eurozone because of its soaring deficit and debt reflected an "absurd hypothesis."

But he warned: "No government, no state can expect from us any special treatment ... The problem is not to get help, the problem is to help oneself."

'Beware Greeks bearing gifts' may come from military antiquity, but in today's market terms, such a lack of confidence is seen as the crucial component, with economists lining up to share their inner doubts.

A damning Brussels report on Greece's "unreliable" economic figures, published on the eve of an International Monetary Fund team probe in the country, will be the focus of talks among all 27 EU nations on Tuesday.

The incoming European commissioner for economic and monetary affairs, Olli Rehn, articulated fears of a potential "spillover effect for the entire euro area" during his European parliamentary confirmation hearing.

Former IMF and Wall Street analyst Desmond Lachman went much, much further in an opinion-piece penned in the Financial Times this week, which raised the spectre of Greece going the way of Argentina.

"Much like Argentina a decade ago, Greece is approaching the final stages of its currency arrangement," he predicted, adding that "after much official money is thrown its way, Greece's euro membership will end with a bang."

Natixis' Jesus Castillo said "very ambitious" promises did little to banish "quite pessimistic" markets amid fears that interest payments on Greek government bonds -- already double those for German loans -- will again rise.

Ireland, Italy, Portugal and Spain each have their own troubles, but Greek bonds will also become irredeemable, at current ratings after a trio of downgrades, when the European Central Bank reverts to pre-crisis criteria at the end of 2010.

Greek Finance Minister Georges Papaconstantinou has admitted that a "huge credibility gap" exists, and his prime minister, George Papandreou, warns that "unless we plug these gaping wounds we will be constantly looking for money."

Athens bond issues this week exceeded a 50-billion-euro (72-billion-dollar) borrowing target for 2010, but as the euro slid further at Friday's close from a 15-month November high against the greenback, fears of contagion were rife.