Greece is desperately trying to keep its financial flag flying
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Debt-laden Greece has asked for more talks about a financial rescue plan put together by eurozone countries and the International Monetary Fund (IMF). The euro also fell, again highlighting nervousness among investors about the indebtedness of some countries. Greece's finance ministry said that asking for talks on the rescue deal did not mean it would draw down the money. On Sunday Greece agreed to a 30bn-euros eurozone package of loans that Athens could use if the country defaulted. The package, to be drawn on only as a last resort, was designed to bolster confidence in the financial markets, where Greece is raising billions of euros to pay off its debts. The country's finance ministry said it had written to the European Union, European Central Bank, and IMF to discuss a "multi-year" programme of economic policies. The ministry said this did not mean it was about to call on the loans. In a statement, the ministry said: "With this letter, Greece is officially starting discussions about specifying the terms of the mechanism [of the aid package]. "The letter is not the activation of the aid mechanism."
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The IMF's managing director, Dominique Strauss-Kahn, responded to the letter, saying he would send a team to Athens on Monday to begin negotiations. The EU and ECB were not immediately available for comment. But the request for talks did little to underpin confidence in Greece's financial health. Greek borrowing costs, which the loan package was intended to lower, are likely to rise further. The spread - or gap - between 10-year Greek bonds and German bonds hit 4.2 percentage points, up from 3.9 on Wednesday. The spread was higher than before the loan deal was announced. Debt burden Greece needs to borrow about 11bn euros by the end of May, and a total of 54bn euros by the end of the year. On Tuesday Greece successfully raised 1.56bn euros in an over-subscribed issue of bonds to be re-paid in six and 12 months. Greece has now accepted an additional 450m euros in bids for the bonds, bringing the total raised to 2.01bn euros. However, the interest rate, or yield, Greece is paying on the bond issue is three times what it paid in January. Greece's government has not ruled out using the standby loans, but says it will keep trying to raise money from financial markets. But any rise in Greece's borrowing costs simply worsens its debt problems. Meanwhile, the euro was trading down almost 1% against the dollar at mid-day, at $1.3520, its lowest since last week.
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