Greece promised more cuts to its bloated public sector on Tuesday and held a second conference call in two days with its international lenders, whom it must convince to extend more loans to prevent its coffers running dry next month.
Anger over austerity among ordinary Greeks is matched by bailout fatigue among north European creditor countries, especially Germany, Finland and the Netherlands, which are taking the toughest line on strict conditions for more money.
The European Union and International Monetary Fund are increasing pressure on Athens to deliver on pledges to slash its deficit even as the economy heads for a fourth year of recession.
The IMF has told Athens to cut the public workforce and payroll, shut inefficient state entities, fight tax evasion and sell billions of euros of state property to plug its budget gap.
The government has introduced painful new taxes on wages and property and cut public sector pay and pensions, but had baulked until Tuesday at sacking more civil servants, a key component of the governing Socialist party's electorate.
Deputy government spokesman Angelos Tolkas told NET radio:
Our primary target is to shrink the state. The Greek state budget has stopped paying the wages of some 200,000 civil servants in the last two years. And we are continuing.
Public protests against the cuts have dwindled since early this year when Athens saw bloody clashes between police and rioters, but frustration is growing again as the crisis worsens.
They have crippled us, said 44-year-old public sector employee Niki Playannakou, a single mother.
We accepted the cuts last year, we put up with some things for the sake of the country. But as time goes by we don't see things improving. How much can a family take?
On Tuesday evening, Finance Minister Evangelos Venizelos began a second phone call in as many days with EU and IMF inspectors -- known as the troika -- on austerity measures.
Greek government officials said a first call on Monday had been productive and substantive and they expected to clinch the release of an 8 billion euro ($11 billion) aid tranche despite consistently missing the conditions that were set.
The IMF/EU mission had abruptly left Greece on September 2 in a disagreement over the extent of the slippage, and what Athens must do to make good on its pledges.
Officials close to the troika said the IMF/EU monitors would need to return to Athens to seal any agreement, but Tuesday's talks could set out the timeframe and scope of their visit.
They have to come to Athens to conclude, one official told Reuters, on condition of anonymity.
Venizelos has pledged to take on as much austerity as needed to avoid a default that would be likely to deepen turmoil on already shaky global markets and push other indebted countries in the euro zone periphery closer to the brink.
Officials close to the troika had said before the call that Greece needed to flesh out details of how to prevent slippage from next year's budget deficit target of 6.5 percent of GDP.
DEFAULT TOO RISKY?
Some economists say that, because the euro zone has not yet approved the EFSF stabilization fund meant to protect its weaker members, the risk of letting Athens default and perhaps triggering a messy breakup of the zone may be too great for its lenders to deny it one more dose of aid.
One barometer, CDS default insurance contracts, suggests investors see the probability of a Greek default at more than 90 percent, according to Reuters calculations on data from Market.
That could include a technical default engineered under a bond-swap plan meant to offer Greece some relief from its debt load, which looks set to exceed 165 percent of GDP this year.
According to an official from the body that would decide whether a 'credit event' had occurred, neither that plan nor an inability of Athens to pay state workers next month should trigger a payout on CDS contracts in the near term, an event that could cause wider market ripples.
Athens also denied a report in the Kathimerini daily that Prime Minister George Papandreou was considering holding a referendum on whether Greece should tackle its debt crisis within the single currency or leave.
The government has long said it is planning a referendum this autumn on political reforms, but has repeatedly denied that it would concern euro membership.
No. We haven't discussed such an issue, definitely not, deputy government spokesman Tolkas said.
The debt ratings agency Fitch said an aura of ambivalence to Greece staying in the bloc had raised doubts over political commitment to the single currency.
But it added: Fitch expects Greece to default but not leave the euro zone.
(Additional reporting by George Georgiopoulos and Angeliki Koutantou; Writing by Michael Winfrey; Editing by Kevin Liffey)