Greece not 'out of woods' yet says top EU official

Greece must step up efforts to reach an agreement with i

LONDON/BRUSSELS — The need for a new rescue program for Greece promises a drawn-out drama of late-night negotiations but is unlikely to trigger the sort of crisis that has threatened the breakup of the euro in the recent past. That the collapse of the single currency is no longer an immediate danger reflects the solidity of the political bargain that saved Greece a year ago.

A small dose of reality has set in for a group of European central bankers: Euro Officials Begin to Weigh Greek Exit as Euro Weakens. Greece’s possible exit from the euro moved to the center of Europe’s financial-crisis debate, rattling markets as authorities in Athens struggled to form a government.

Major debt restructuring for both Cyprus and Greece will probably force the struggling euro zone countries to leave the single currency, according to Citigroup's latest economic outlook, which warned markets could again be hit by escalating fears.

EU and IMF rescue auditors launched a new probe in Greece on Tuesday amid a rising eurozone crisis over talk of debt restructuring and a second bailout.Experts from the European Union and International Monetary Fund will decide if Greece merits a critical new slice of rescue funding, just as a top official at the European Central Bank (ECB) warned that debt default or restructuring would hit the entire eurozone.A restructuring of debt would put Greece's banking system "on its knees", the head of the Italian central bank Lorenzo Bini Smaghi told Italian daily La Stampa.

Inspectors from Greece's lenders have put a postponed visit to the country back on the agenda and will return early next week after Athens made a new proposal on filling a gap in the 2014 budget, the European Commission said. The team of officials from the International Monetary Fund, the European Commission and the European Central Bank - known as the Troika - will decide whether to pay out the next tranche of loans under Greece's bailout program. The inspectors visit Athens regularly to check progress on its bailout commitments.