Greece says it is preparing the ground for possible EU-IMF emergency debt relief worth billions of euro as it announced another bid to raise fresh money on its own.
'We are making all the preparatory moves,' Prime Minister George Papandreou said in Athens. His comments came ahead of crucial talks in the Greek capital on Monday on details of the proposed rescue scheme with officials from the EU and the International Monetary Fund.
The EU earlier this month agreed to lend Greece €30 billion this year at a below market rate of around 5% to help the country shake off a crippling debt burden. Another €15 billion could be provided by the IMF.
EU and Greek officials had hoped the aid safety net would reassure investors on Greece's solvency and enable the country to borrow critically needed funds at rates similar to other euro zone members.
But in the five days since the deal was disclosed, the interest Greece would have to pay on newly issued bonds has stayed stubbornly high as doubts have grown about the plan. The yield on the 10-year Greek sovereign bond rose to 7.366% this evening.
The Greek debt management agency meanwhile announced a bid to raise €1.5 billion through an auction of 13-week treasury bills on Tuesday. Greece has to find around €10 billion by the end of next month, part of about €54 billion needed for all this year. Greece's total debts come to about €300 billion.
Last week it drew strong demand for a test debt issue but had to offer high interest rates despite the stand-by rescue guarantee from the euro zone.
The EU-IMF aid initiative faces major obstacles, as parliamentary approval will be required in some countries and public opposition is running high in Germany, Europe's biggest economy and the main potential contributor to the loans.
Euro zone finance officials meeting in Madrid today meanwhile sought to play down the potential for any immediate request for the aid from Greece. Jean-Claude Juncker, head of the Eurogroup of finance ministers, stressed that Greece had yet to make any formal request for aid.
Greek banks' situation remains difficult - Trichet
European Central Bank President Jean-Claude Trichet told euro zone finance ministers that the situation for Greek banks remains difficult and could deteriorate further, according to the text of a speech to be delivered to euro zone financial ministers.
Mr Trichet said the Greek banking system was availing itself of the liquidity provided by the ECB and national central banks while the recent changes to rules on accepting assets as security in exchange for loans removed the risk banks would no longer be able to use government bonds as collateral.
'Still the liquidity situation of Greek banks remains difficult and could deteriorate,' the ECB President said, who was meeting the euro zone ministers on Friday in Madrid.
He also said market worries remained after an aid package announced last week to help Greece.
'Despite the commitments expressed in the statements by the euro area heads of state and governments on 25 March and Eurogroup on 11 April and the determination signalled by the Greek government to implement the announced adjustment measures for 2010, financial market tensions are persisting,' he said.
Ash hitting ministers' travel plans
Owing to flight and travel chaos caused by the ash cloud spouting from an Icelandic volcano, a number of ministers and delegates from around the 27 European Union countries gathering for talks scheduled to last until Sunday had yet to reach the venue in Madrid this morning.
A Spanish presidency spokesman said that ministers from Belgium, Britain, the Czech Republic, Estonia, Hungary, Poland, Romaania, Slovakia and Sweden had been held up.
Some 17,000 flights in European airspace were likely to be cancelled today, European air traffic control coordinators said.
