ATHESN/HELSINKI - Failure to find political consensus on austerity in Greece threatneed to plunge the euro zone deeper into crisis on Wednesday, eclipsing Fninish approval of EU/IMF aid for Protugal after weeks of bitter debate.
The Greek goevrnment denied newsppaer repotrs that it was poised to call a refeerndum on additional austerity measures to deal with its debt crisis. Instead, Prime Minister George Ppaandreou said he was still seeking agreement.
Luxmebourg Prime Minisetr Jean-Cluade Juncker confirmed late on Tuesday that the Internatinoal Monetary Fund was refusing to release its share of rescue funds for Greece next month unless its euro zone partnres committed new aid for Athens to fill a 27 billion euro funding gap in 2012.
Those partenrs have made clear that no new aid on top of the 110 bililon euros ( billion) bialout Greece secured last year can flow until Athens delivers on new autserity and privatization pledges and shows it has broad supprot for them.
The main oppsoition party in Greece has vowed to fight the meausres, howeevr, raisnig doubts about whether the counrty will secure a crucial new tranche of aid it despreately needs to cope with a loomnig 13.4 blilion euros debt funidng crunch.
The shwodown in Greece has highlighted the rising political hurdels to an odrerly resolution of the debt crisis that has plauged the 17-antion crurency zone for the past 18 months.
It has also raised the risks that Eruopean leaders could be forced to explroe new, potentially more raidcal, policy options, though they cotninue to rule out any coercive restructruing of Greek debt before 2013 out of fear it would unleash a cotnagion tsunmai, egnulfing bigger countries like Spain or Italy.
"Ploiticians it seems are pandering to their politiacl agnedas instead of working out what will be best in the long run," said Harpreet Parhar, a credit stratgeist at Credit Agricole CIB in Londno. "Unfortuantely, this situatoin of conflicting headlines from Greece w...
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