LONDON (AP) -- Mounting confusion over whether Greece will get vital bailout cash to avoid defaulting next month is rekindling fears that Europe's debt crisis will spread to bigger countries like Italy.
As stocks and the euro fell sharply on Thursday, borrowing rates rose for Italy and Spain, an indication of renewed investor concerns that they will eventually be dragged back into the crisis that had shown some signs of easing over the past couple of months.
The pressure on the two countries had eased substantially in recent weeks, primarily because the European Central Bank offered super-cheap long-term loans to banks.
But new jitters were creeping into markets as worries grew about a default in Greece next month. The country has yet to clinch deals for a bailout worth €130 billion ($170 billion) and an accompanying €100 billion ($131 billion) debt writedown by private bondholders.
Jean-Claude Juncker, who heads eurozone finance meetings, promised more clarity on Monday, when he said decisions will be made.
Over the past few days, doubts grew that the bailout deal may be unravelling and on Wednesday relations between Greece and its partners in the eurozone hit a new low.
Greek Finance Minister Evangelos Venizolos said there were some in the eurozone who wanted Greece out of the euro while his counterpart in Germany Wolfgang Schaeuble even urged the postponement of elections in Greece, which are due in April.
"Yesterday's back and forth between Greek politicians and EU policymakers had all the hallmarks of an unedifying playground spat, with accusations and insults flying thick and fast," said Michael Hewson, markets analyst at CMC Markets.
"Unfortunately there will be no winners or losers in this particular little saga as Europe gives the impression of gearing up to cut Greece loose, unless they subjugate to demands for new measures to sate various new concerns."
As uncertainty lingers, investors are gradually reassessing their assumption that Greece will get the money, prompting big market movements Thursday. The Stoxx 50 index of leading European shares was down 0.5 percent while the euro slipped by the same rate to below $1.30.
Meanwhile, the yield on Italy's ten-year bond has risen by 0.20 percentage points to 5.84 percent while Spain's rate has risen another 0.16 percentage points to 5.55 percent. Though both are still down from the 7 percent mark that is considered unsustainable in the long-run, the increases are the biggest daily movements in weeks.
Greece was asked last week to meet three demands so it could get the bailout cash which it needs to avoid defaulting on its debts on March 20, when a big bond redemption is due. As well as insisting that Parliament agrees another batch of austerity measures, the eurozone wanted clarity on a further €325 million ($425 million) in savings by Greece and the written agreement by the leaders of the Greek coalition government to the measures after the elections.
Even though all three conditions appear to have cleared, the eurozone is balking at finalizing the bailout, with some suggestions that money should not be handed over until after the elections.
On Wednesday evening, after a three-and-a-half-hour conference call between the 17 eurozone finance ministers, it looked like more hurdles have been put in front of Greece.
Though Jean-Claude Juncker, the head of the eurozone group of finance ministers, said Greece had made "substantial further progress," he added that "further considerations are necessary regarding the specific mechanisms to strengthen the surveillance of programme implementation and to ensure that priority is given to debt servicing."
His statement suggests that Greece's eurozone creditors may be insisting on a recent proposal by France and Germany to set up an account, separate from Greece's general budget, that would be dedicated to paying off Greece's massive debt. It was unclear whether this account would only manage the bailout money or whether government revenue could also be funneled into it.
Such an account would give the eurozone more control over what Greece does with its money, after the country has repeatedly missed budget, reform and privatization targets over the past two years. However, it could also be seen as an unprecedented interference into the fiscal affairs of a sovereign state.
The European Commission, which is in charge of economic surveillance in the European Union, is now working on a specific proposal for such an escrow account, which will be present to the ministers at a meeting on Monday.
In Athens, Venizelos said a combination of the country's written pledges, Parliament's passage of the austerity measures with a two-thirds majority and labor reform legislation were "a credible response to all those in Europe who doubt our ability to implement the program and to continue its implementation after the coming elections."