Greek fin min: Athens not asking for rescue

[April 20, 2010]  ATHENS, Greece (AP) -- Debt-ridden Greece has not asked for the activation of a euro-zone and International Monetary Fund rescue plan designed to prevent a default, but details of how the plan would operate are being worked out, the finance minister said Friday.

Greece has faced spiraling borrowing costs in the last few days, a sign that markets fear the country will be unable to pay off its debts and that a bailout may be needed soon.

The country has been gripped by a debt crisis for months, and in March eurozone leaders agreed on a hard-fought bailout plan that would provide Greece with bilateral loans and IMF funds to avoid default and protect the euro. Athens had hoped the existance of the rescue package would calm markets and bring down the borrowing costs.

Asked whether Greece would seek help, Finance Minister George Papaconstantinou said that "no such issue has been raised."

"We have said that Greece does not intend to make use of the mechanism but it is very important for our country for this safety net to exist," he said after meeting with Prime Minister George Papandreou to discuss the situation.

But the rescue plan is vaguely worded and has not eased market concerns.

Papaconstantinou said the details of how the mechanism would operate were being worked out.

"In the last few days, there has been, as scheduled, a detailing of this mechanism, in other words the exact terms of how it would work," he said.

Under the vaguely-worded rescue plan, euro-zone leaders pledged to provide support with bilateral loans and IMF funds to prevent a default and protect the euro. The loans would only come with unanimous approval of all 16 euro-zone members -- including Germany, which has been reluctant to bail out Greece -- and only as a last resort.

Borrowing costs that had spiked sharply in the past few days began to ease slightly, although they remained alarmingly high Friday. The interest rate gap, or spread, between Greek 10-year government bonds and the German equivalent, considered a benchmark of stability, edged lower to about 4.12 percentage points from Thursday's high of 4.48 percentage points. But that still means Greece would have to borrow at more than twice the cost of Germany.

Papaconstantinou said the government was concerned by the high rates, but that they believed they would fall as market confidence was restored.

"We consider that they don't reflect the true state of the economy, nor the effort and the results that the government has already achieved," Papaconstantinou said. "But as time goes by, I believe that these will be understood in the markets and our international partners, and so we will have more reasonable borrowing interest rates."

[Associated Press; By ELENA BECATOROS]

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