Greece did not come upwith the goods. That sums up the message from Brussels after Athens once again failed to push through a new plan to save an additional 325 million euros ($250 million) to stave off bankruptcy or to at least provide political guarantees to implement the austerity program.

A planned meeting of eurozone finance ministers, scheduled for Wednesday, was cancelled and turned instead into a conference call without any binding decision-making powers.

A decision on a new aid package for Greece has been put off till next week.

Athens only responded when Brussels put its foot down. The country's conservative party leader, Antonis Samaras, sent a letter on Wednesday committing to the bailout terms of international lenders, should his New Democratic party win elections expected in April. Other parties in the Greek coalition government also sent their own pledges.

Whether or not the scolding from German Finance Minister Wolfgang Schäuble had anything to do with the change of heart in Athens is not known. In any case, it is not the first time that Samaras has been criticized by his fellow European conservatives for his inflexible, politically-motivated decision, as the Greek debt crisis deepened last fall. At the time, he did not seem particularly bothered by the criticism, either.

Greece - a step away from bankruptcy?

Prime Minister and former ECB banker Lukas Papademos warned Greek parliamentarians on Monday as they debated the cost-cutting measures that their vote "would ultimately decide whether or not Greece remains in the eurozone or is driven into a disorderly default."

Their vote for the austerity measures, he said, "was the prerequisite for economic growth in the country."

The specter of default, however, is looming larger, as the prospects for economic growth diminish. On Tuesday, the national statistics office in Athens published the latest economic figures. Gross Domestic Product for 2011 contracted 6.8 percent, while one in five Greeks are without a job. Economic experts and political leaders are increasingly concerned that too much emphasis is being placed on cutting costs and too little on economic growth. The European Parliament in Strasbourg on Wednesday called for investment programs in Greece.

Save, invest, reform

Brussels is also demanding structural reforms –-beginning with a functioning tax system where civil servants actually collect the money owed. The EU is putting pressure on Athens because any investment or austerity program is doomed to failure if the state that administers them is as corrupt, ragged and inefficient as the Greek system currently is.

But, of course, it remains to be seen whether the decades-old administrative apparatus can be dismantled, and replaced by a refurbished, effective bureaucracy anytime soon.

Brussels expects an answer from the political leadership in Athens, but most observers are not convinced it is even attempting to find one.

The Greek economist Michael Haliassos, from Frankfurt's Goethe University, has a broad range of expertise on international economic issues, but is also well versed in the structural and political problems of his home country. In his view, Greek politics are at a standstill because no party wants to foist unpopular measures on voters who will be going to the polls sometime in April.

Toothless chest-beating

The pressure piled on Greece by Brussels has had little effect so far because kicking Athens out of the eurozone is more of an empty threat than a real alternative. The possible consequences of such a move - a mass collapse of banks holding Greek debt, shockwaves on financial markets and a domino effect on other highly indebted countries - would be hard to predict, let alone contain.

Economists and finance experts - most recently Jörg Asmussen from the European Central Bank on Wednesday - have warned of these risks and want to keep Greece in the eurozone.

Author: Daphne Grathwohl / gb
Editor: Joanna Impey