Greece has just one day left to strike a deal with impatient lenders and reluctant political party leaders on a 130 billion rescue plan before the country is pushed towards a chaotic default, its finance minister warned on Saturday.
Athens has wrangled without success for weeks with lenders and private bondholders on the bailout package and a bond swap plan, putting itself dangerously close to bankruptcy as 14.5 billion euros of debt falls due in mid-March.
The talks have been held up largely on concern that the rescue plan may not be enough to bring Greece's debt back to a sustainable level, and fears that Athens lacks the will or ability to ram through reforms demanded in exchange for aid.
In an apparent warning to Greek political leaders opposing key reforms, Finance Minister Evangelos Venizelos said the patience of European partners and the International Monetary Fund footing the bill for Greece's bailout was wearing thin.
There is great impatience and great pressure not only from the three institutions that make up the troika but also from euro zone member states, Venizelos said after what he called a very difficult conference call with euro zone counterparts.
The moment is very crucial. Everything should be concluded by tomorrow night. We are on a knife-edge, he told reporters.
Athens had made progress by agreeing a plan to recapitalise Greek banks and details on privatisation, he said. A senior banker told Reuters the recapitalisation would occur mainly via common shares with restricted voting rights.
But far bigger sticking points on wages and spending cuts remain unresolved, and Venizelos warned that the stakes were rising as time ran out. The distance between the successful completion of the procedures and an impasse which could happen by accident or because of a misunderstanding is very small.
Technocrat Prime Minister Lucas Papademos was due to continue talks with lenders on Saturday in a bid to clinch agreement before calling in the socialist, conservative and far-right party leaders in his coalition to seek their blessing.
That meeting of party chiefs, initially scheduled for Saturday, has now been put off until early Sunday afternoon, a government source said.
NOT BACKING DOWN
Athens' talks with its international lenders have stumbled over their demands, which include cutting labour costs by axing holiday bonuses and lowering the minimum wage - proposals vehemently opposed by Greek political party chiefs.
Greek officials have described the negotiations as tough, with the troika of European Central Bank, European Union and IMF lenders unwilling to yield an inch from their demands. Marathon negotiations ended without a deal on Friday.
The troika is not backing down on wages, holiday bonuses and supplementary pensions, a Greek government official said.
None of these issues have been resolved. They are all open and the onus is on political leaders.
The talks have moved slowly also because the troika wants agreement on all parts of the complex Greek rescue deal before signing off on the bailout, a source close to the talks said.
That includes reforms and spending cuts, pledges by political leaders to back the reforms, as well as the debt swap and any other initiative -- including any taken by public creditors like the ECB -- that would bring Greece's debt down to the targeted 120 pct of GDP level by 2020, the source said.
European Union sources say euro zone governments may now have to cough up an extra 15 billion euros on top of the 130 billion already agreed.
Athens also wants public creditors like the ECB to take part in the bond swap deal, under which banks and insurers will take real losses of about 70 percent on the Greek debt they hold in a bid to ease Greece's debt burden by 100 billion euros.
Ta Nea newspaper reported that the debt swap would now cut Greece's debt by 170 billion euros after including a 23 billion euro contribution from public creditors including the ECB.
The bond swap talks were now the easier part of the overall process to save Greece, Venizelos said earlier. Representatives for the banks and insurers were expected to continue talks in Athens over the weekend.
Increasingly frustrated with Athens' inability to enact the reforms needed to reshape the recession-hit Greek economy, foreign lenders have demanded proof of the country's commitment to spending cuts before doling out any more funds.
They have demanded extra spending cuts worth about 1 percent of GDP - or just above 2 billion euros - this year, including big cuts in defence and health spending.
They want all Greek political leaders - who are keen not to be linked directly with the painful reforms as they gear up for elections expected in April - to endorse the measures, irrespective of the outcome at the polls.
Greek political leaders must offer their commitment to the programme, said a source close to the lenders.
No more loans will be approved if they don't.
In the latest sign that coaxing political leaders into backing the reforms will be anything but easy, the leader of the far-right LAOS party, George Karatzaferis, rejected Venizelos' ultimatum to strike a deal by Sunday.
We must go through every letter, every comma of the lenders' proposals and see whether they help the country and boost growth, he said at a Greek ceremony to celebrate the new year. If the bailout doesn't suit us, we will not accept it.
At the traditional pie-cutting ceremony, Karatzaferis also gave away drachma coins to fondly recall Greece's pre-euro days -- a return to which many Greeks fear.
With Greece in its fifth year of recession, ordinary Greeks are seething as round after round of austerity is imposed on them as the price for saving the country from default.
About 2,000 demonstrators clad in black, some hooded or wearing helmets, waved red flags, beat drums and chanted Burn parliament as they marched to protest over austerity measures and the politicians they blame for the country's crisis.
Dozens of leftist protesters also held a demonstration outside the prime minister's office. About two dozen hooded protesters threw stones at the Greek president's residence in central Athens before fleeing, police said.
(Additional reporting by Angeliki Koutantou and Ingrid Melander; Writing by Deepa Babington; Editing by Hugh Lawson and Mark Heinrich)