Greece scrambles to convince sceptical euro partners

(BRUSSELS) - Athens raced Tuesday to convince sceptical eurozone allies that it will enact budget cuts required for a new bailout as a threat of eurozone expulsion returned and Greece plunged deeper in recession.

With 24 hours to go until a meeting of eurozone finance ministers, the Greek coalition was looking Tuesday for another 325 million euros in savings, one of the conditions set by lenders in return for the second bailout in two years.

Greece desperately needs the 230-billion-euro ($303-billion) rescue package -- 130 billion euros in fresh loans and a 100-billion-euro write down on privately-held bonds -- to avoid defaulting on debt owed on March 20.

EU Economic Affairs Commissioner Olli Rehn said he expected a decision on the bailout "soon" but renewed calls for Greek politicians to fulfill their commitments.

However, Dutch Finance Minister Jan Kees de Jager warned that chances the Eurogroup would give final approve to the rescue were "low."

"The (Greeks) myst first do their homework better," he told RTLZ television, adding that the Dutch wanted to examine the consequences of the package on growth and debt before voting on it.

The Greek parliament approved 3.2 billion euros in cuts on Sunday despite protests and riots in the streets of Athens, as Greek workers were hit by a 22-percent reduction of the minimum wage.

But eurozone partners, who no longer trust Athens after the country failed to live up to past promises, also want a commitment to austerity in writing from politicians who face an election in April.

"I can understand the pain and turmoil in Greece, but at the same time this is the framework that has been decided by the euro area member states together with the IMF, and we work on the basis of this framework," Rehn said.

"It is really in the interest of everybody now in Greece and in Europe to make this work and avoid a disorderly default of Greece, which would have devastating consequences especially to the less well-off members of Greek society and negative ramifications to the European economy overall."

The coalition cabinet led by Prime Minister Lucas Papademos was to hold a meeting Tuesday to discuss ways of finding the extra 325 million euros.

"A decision will be made on where this sum will come from," a finance ministry source said.

The enormous problems confronting Greece were illustrated by new data showing that the economy, in recession for a fifth year, shrank by 7.0 percent in the fourth quarter of 2011 compared with the same period a year earlier.

Luxembourg Finance Minister Luc Frieden cranked up the pressure, warning that if Athens failed to deliver, then the eurozone will move on without it.

"I still think we should do our best to keep the eurozone with all of its members," Frieden said in Washington late on Monday.

"Our preferred scenario is Greece complying, the eurozone giving additional funds and -- I cannot insist enough on this aspect -- clear monitoring of the implementation of what Greece has promised to do," he said.

"If they don't do all this, I think then we must go on with 16 countries," said Frieden, whose influential prime minister, Jean-Claude Juncker, chairs the meetings of Eurogroup finance ministers.

Time is running out for Greece, which must repay 14.5 billion euros in bonds on March 20 and will still face many hurdles until then.

Eurozone finance ministers may only endorse the bond swap between banks and Athens on Wednesday while giving a conditional, in-principle agreement for the bailout loans.

The release of funds will then depend on concrete measures taken by the Greek government, a European diplomat said.

The German and Dutch parliaments separately need to give their approvals, Germany's vote scheduled for February 27.

Europe is also looking for outside help to resolve the debt crisis.

Chinese Premier Wen Jiabao told EU president Herman Van Rompuy and European Commission president Jose Manuel Barroso in Beijing that China was ready to increase its participation in the effort.

Wen said he wanted to see Europe -- China's biggest trading partner -- "maintain stability and prosperity," a day after ratings agency Moody's downgraded Italy, Spain and Portugal.

The downgrades did not faze the markets, however, as Italy was able to raise 6.0 billion euros in an auction of medium-term bonds with lower interest rates.

Even Greece raised 1.3 billion euros in a sale of three-month treasury bills with the return for investors dipping to 4.61 percent.