Groundhog Day: Allegedly "Only One Day Left" to Save Greece; LAOS Party Leader Rejects Ultimatum, Hands Out Drachma Coins to Fondly Recall Greece's Pre-Euro Days

Greek default drama is much like the movie Groundhog Day. If you prefer a quote from Yogi Berra instead, then please consider It's déjà vu all over again.

Every day for weeks we have heard a "deal is close". Moreover, on multiple occasions at the end of the week we were informed Greece "had" to reach agreement over the weekend or Greece would default. Let's hope this time someone really means it.

Once again, Greece says faces 24-hour deadline to clinch rescue.

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.

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.

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 labor 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 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 defense 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 program," 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.

Please stop the madness. Bailouts to Greece cannot possibly work. Moreover, the world will not end on Monday if Greece exits the Euro, nor will the world end if Portugal and Spain do the same later this year or next.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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