Greece rushes to meet lender demands (Reuters)

ATHENS (Reuters) ? The Greek government rushed on Tuesday to wring out another 325 million euros ($428 million) in budget cuts to satisfy euro zone finance ministers mulling whether to sign off on a rescue package to save the country from a chaotic default.

Squeezed between skeptical European capitals and deep anger in Greece, political leaders must also produce written commitments to stick to the terms of the 130 billion euro ($172 billion) bailout before the ministers meet on Wednesday.

A government official said the cabinet had already a proposal on the table and that Prime Minister Lucas Papademos would chair a session of the government at 3 p.m. (1300 GMT)

"There is a specific proposal by the government for the 325 million euros to be submitted to the Eurogroup tomorrow," the official, who declined to be named, told Reuters.

A second government source said: "The government will have a solution before the Eurogroup (meeting of euro zone finance ministers)."

Greek lawmakers endorsed another 3.3 billion euros in cuts in wages, pensions and jobs on Sunday despite unrest on the streets of the capital, Athens.

The violence was the worst in years, with dozens of buildings set ablaze, damaged or looted.

But the bill left unexplained 325 million euros of cuts that the European Union and International Monetary Fund now want clarified before they sign off on the bailout.

There was no immediate sign that political leaders would put pen to paper to guarantee they will implement the terms of the bailout before and after an election expected in April.

Antonis Samaras, leader of the conservative New Democracy party and a member of the coalition, has taken a harder line on the austerity measures than others in the coalition.

He is the frontrunner to become prime minister in April, and while he voted 'Yes' in parliament on Sunday and expelled from the party a quarter of his deputies for rebelling, Samaras indicated he would try to renegotiate the terms of the bailout.

There is growing doubt among Greece's foreign lenders that the country - threatened by deepening social turmoil - is willing to and capable of seeing through a second round of punishing austerity since 2010.

LEAVE EURO ZONE?

Greece needs the funds to avoid a disorderly default when 14.5 billion euros in debt repayments fall due on March 20.

The bailout provides for a bond swap to ease Greece's debt burden by cutting the real value of private-sector investors' bond holdings by some 70 percent. Officials say the terms of the swap will be announced on Wednesday.

"The next three weeks will be hellish. The list of actions regarding the PSI (Private Sector Involvement) and the memorandum is extremely pressing," government spokesman Pantelis Kapsis said on Monday.

Underlining the doubts of Greece's euro zone partners, Luxembourg's finance minister, Luc Frieden, said on Monday that a failure by Greece to meet all the conditions laid down for it would lead to its exit from the euro zone.

Greece may decide it is better to leave the euro zone than to go through with such severe budget cuts, he told the Atlantic Council in Washington.

A sharply devalued currency would give it more flexibility.

"It might be something which would allow Greece also to get a new start ... to create an economy that can create jobs. This however is not a scenario that I would prefer," he said.

The euro zone was better prepared now than a year ago to cope with a Greek default and exit from the euro zone, Frieden said, a view echoed by German Finance Minister Wolfgang Schaeuble speaking to the ZDF public broadcaster.

But U.S. rating agency Moody's, citing growing risks from Europe's debt crisis and worries about its ability to make needed reforms, downgraded the ratings of six European countries late on Monday and put Britain, France and Austria on negative outlook.

Uncertainty about the resources that will be devoted to tackling the crisis, and Europe's "increasingly weak macroeconomic prospects" were other factors behind its action, it said.

($1 = 0.7566 euros)

(Additional reporting by Karolina Tagaris, Dina Kyriakidou, Ingrid Melander and Tatiana Fragou in Athens, Sophie Sassard in London, Philipp Halstrick in Frankfurt and Brian Rohan in Berlin; Writing by Matt Robinson)

Source: http://us.rd.yahoo.com/dailynews/rss/eurobiz/*http%3A//news.yahoo.com/s/nm/20120214/bs_nm/us_greece

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