Luxembourg's prime minister and Eurogroup chairman, Jean-Claude Juncker, left, with Greece's finance minister Evangelos Venizelos at the start of a Eurogroup meeting at the European Union council headquarters in Brussels, February 9 2012.
With the European Union demanding more spending cuts from Greece in return for billions of dollars in bailout funds, doubts are growing over whether more austerity is the right solution for Athens. Some analysts and politicians suggest that a once worst-case scenario, Greece leaving the eurozone, may not be so bad.
Even as he promised that Greece would meet European Union requirements for another installment of rescue funds, Greek Finance Minister Evangelos Venizelos said Wednesday that his country was on a "knife's edge." He said Some EU members want Greece to leave the eurozone, which he called "playing with fire."
The EU has set tough conditions for Greece to get a $173 billion bailout. It needs the money by March 20, otherwise it risks defaulting on its massive debt. Despite angry public protests and riots last weekend, the Greek parliament voted in favor of more austerity measures. The move drew praise from EU officials like European Economic and Monetary Commissioner Olli Rehn.
"I'm confident that the other conditions, including for instance, the identification of the concrete measures over 325 million euros [more than $424 million in spending cuts] will be completed by the next meeting of the eurogroup," said Reihn.
But Greece did not meet the other conditions by Wednesday, when EU finance ministers were expected to decide on the bailout money. So instead, the meeting was downgraded to a conference call.
Philip Whyte, senior research fellow at the London-based Center for European Reform, describes the standoff between Greece and its creditors - which also includes the International Monetary Fund and the European Central Bank - as a bluffing game.
"The social strains in Greece are increasing by the day," he said. "At the same time, there's a complete loss of trust amongst the troika [EU, IMF and ECB] in Greece's willingness and ability to push through the sort of reforms that everyone expects the Greeks to push through."
Europe's two largest economies, France and Germany, have led the push for further Greek cuts. In a radio interview, French Foreign Minister Alain Juppe was optimistic that Athens would meet Europe's terms.
Juppe said a deal must reached. If Greece defaults on its debts and leaves the eurozone, the chaos would be even more terrible for the Greek population than it is today, and bad news for the eurozone.
Whyte also believes Greece will meet the conditions. But critics say that with the Greek economy shrinking, making it even tougher to repay its debts, further austerity measures aren't the answer.
"There is a growing view among certain countries in northern Europe that this game can't go on," said Whyte. "And that letting Greece go [i.e. leave the eurozone] may actually, in the end, be a better option."
This view - that both Greece and Europe would be better off if Athens left the eurozone - was echoed Wednesday by the European Parliament's conservative leader Martin Callahan. Callahan told fellow lawmakers that a so-called "orderly" Greek withdrawal from the monetary union, along with a devaluation of its currency, would save a generation of Greeks from a miserable economic inheritance.