The Greek rescue package got held up again, as donors seek more guarantees on austerity, writes MoneyShow.com senior editor Igor Greenwald.

Say you had friend—let’s call him Konstantin—who borrowed heavily from you, before owning up to unsustainable debt and begging you for a bailout.

And, since this is all entirely make-believe, let’s imagine that you obliged out of concern that Konstantin’s troubles would otherwise ruin your own credit rating. On the condition that he slowly starve himself.

And the self-loathing Konstantin gratefully obliged, subsisting for a while on a liquid diet. And when he became too weak to work and needed more aid, you promised it, provided he stopped drinking too, because what else were you going to do at that point?

So now Konstantin’s in a hospice dying of hunger and thirst, and suddenly giving him more dough no longer seems like such a great idea. The guy looks like a goner at this point. Whereas you are looking better of late, thank you, after discovering the joys of printing money.

You start demanding that Konstantin’s children promise to pay his debts once he passes. And when they do, you ask for a blood oath, liens on property, and the indentured servitude of their children.

That would make you Europe, of course, still denying a second bailout to one-time friend Greece out of concern that all its earnest vows will be broken as soon as the money gets to Athens.

European finance ministers adjourned until Monday yesterday without green-lighting the latest €130 billion rescue. Northern hardliners Finland and Netherlands are said to be lobbying for a delay until new Greek elections in April, with a bridge loan to cover the money Greece must repay in March.

Picking on bankrupt, feckless, helpless Greece is a luxury afforded by the European Central Bank, which is printing all the euros ailing European banks would care to borrow in exchange for dodgy collateral. But the bet here is that this thrill won’t last.

Already, the euro’s counter-trend rally seems to have run out of gas, two weeks ahead of the next ECB injection of badly needed liquidity into European banks. At the same time, Italian and Spanish long-term bond yields, after plummeting from December’s crisis peaks, have been creeping up for the last week.

As argued here repeatedly, the core of the European crisis—the diminished competitiveness of southern Europe—remains unaddressed, while the purported solutions advanced are doing little besides stifling growth.

Moody’s evidently agrees, threatening Wednesday to downgrade 114 European financial institutions (as well as 17 global giants) out of concern over deteriorating economic conditions.

So Greece will likely get its money after all, if only to preserve the illusion of solvency for Europe’s banks.

Beyond that, it’s anyone’s guess how much austerity it will take to either deepen the recession or bring to power governments more interested in growth. Italy and Greece face elections this year, as does France, where austerity has President Nicolas Sarkozy trailing in the polls.

Newly elected politicians will be harder to push around than the creditor-friendly technocrats currently in charge. Hence the rush to squeeze Greece now.