The eurozone piled pressure on Greece Tuesday, conditioning new loans on a radical economic revamp and demanding banks accept far lower interest rates on replacement bonds under a massive debt write-down.
With the existing Greek bailout plans again "off track," Eurogroup chairman Jean-Claude Juncker said finance ministers meeting late Monday in Brussels called on Greece and its EU-IMF auditors "to agree the key parameters of an ambitious adjustment programme as soon as possible."
The European Union's economic affairs commissioner Olli Rehn, part of the so-called 'troika' running the 2010 bailout programme alongside the IMF and the European Central Bank, said Greece would have to "accelerate the implementation of structural reforms" to labour and other markets.
He said the troika, which started negotiations in Athens last week, was tasked "to define prior actions needed for a second (loan) programme, including for instance the kind of structural reforms needed."
Diplomatic sources said Athens would once more have to find new budget savings, even after a raft of tax raises that have sent tens of thousands of angry Greeks out onto the streets.
"There was an emerging consensus that time is running out," said Dutch Finance Minister Jan Kees de Jager.
"Greece must now finally move decisively with structural reforms and generate growth so that its debt becomes sustainable.
"Without that we cannot provide further loans," he said.
Greece's public accounts for 2011 show revenues below target despite these new taxes, with the state's coffers 873 million euros ($1.1 billion) below targeted income and down 1.7 percent on the previous year.
Athens, struggling more than ever despite the first, 110-billion-euro bailout, is waiting for a second 130-billion rescue from its eurozone partners, but a debt writedown from private creditors is a prerequisite for the new loans.
Negotiators delayed late on Monday the deadline for a deal on a debt deal until February 13, as European finance ministers opened the door to a default.
Greek finance ministry sources said officials had given themselves another three weeks to clinch the agreement aimed at cutting Athens' debt by about 100 billion euros ($130 billion).
Diplomats, though, said that meeting the new timetable would require a deal by February 3 in practice, given the legal hurdles that will need to be cleared.
The idea is for banks to accept a cut in the value of their holdings of Greek debt by a nominal 50 percent -- but with variable interest on new bonds to replace the remaining debt, total losses could end up closer to 70 percent.
The writedown would help Greece reduce its debt from around 160 percent of gross domestic product (GDP) currently to about 120 percent in 2020, low enough to trigger a eurozone bailout worth about 130 billion euros.
Athens needs a deal quickly if a voluntary debt exchange is to take place before March 20, when a 14.4 billion euro bond redemption is due.
The February 13 date was made public after the Institute of International Finance said it had put its best possible offer on the table, but the ministers in Brussels said the interest rate still had to come down.
Luxembourg Prime Minister Juncker's entourage said he wants the rate of return on replacement bonds after banks write down 50 percent of existing holdings to settle at between 3.5 percent and 4.0 percent for the period through to 2020.
The banks want at least 4.0 percent, and Juncker said agreement on terms and conditions was required over "the next few days."
Awaiting clarity on Greece, ministers adopted the treaty setting up the new bailout fund that will manage the eurozone loans to Athens, the European Stability Mechanism (ESM).
They also agreed, following the latest call from International Monetary Fund chief Christine Lagarde for "a larger firewall" that its 500-billion-euro effective lending capacity would be "reassessed prior to its entry into force."