By Kerin Hope in Athens, FT.com
(FT) -- Greece will ask its eurozone partners to activate a €30bn rescue package following a week of intense pressure on financial markets, the country's prime minister has said.
George Papandreou, speaking on Friday from the Aegean island of Kastelorizo, said he had asked the finance minister to "take all the necessary steps" to draw down the package.
"We believe our European partners will act decisively and provide Greece with a safe haven to rebuild our ship [of state] with strong and reliable materials," Mr Papandreou said.
His move came the day after a sell-off in Greek bonds intensified, pushing up the yield on 10-year debt to 8.83 per cent -- the highest since Greece joined the eurozone in 2001.
On Friday, yields on Greek long-term government bonds pulled back somewhat but remained close to the elevated levels hit during the previous session -- suggesting the ebullient stock market reaction to the aid story was misplaced.
The 10-year note was yielding 8.65 per cent, down 27 basis points, but the two-year yield rose 40bp to 10.23 per cent.
"We and our EU partners hope this decision will be enough to calm markets so that we will be able to finance our country's debt at lower interest rates," Mr Papandreou said.
The prime minister had hoped to avoid activating the loan mechanism until mid-May in order to prepare public opinion for harsh measures while details of the package were being worked out.
The loan terms are being negotiated with a visiting team from the European Commission, the European Central Bank and the International Monetary Fund, which is expected to boost the package by providing a loan of €10bn to €15bn.
But Thursday's announcement by Eurostat, the EU's statistical service, that Greece's budget deficit for 2009 had been revised upwards from 12.9 to 13.6 per cent of gross domestic product sent bond yields soaring.
In another blow to the country's credibility, Moody's, the ratings agency, on Thursday cut its rating on Greek debt one notch to A3 in its second downgrade of Greece this year.
Analysts voiced fears that the country might soon have to consider a voluntary restructuring of its debt in order to meet large repayments due in the next three years.
But George Papaconstantinou, finance minister, this week denied that Greece was working on a debt restructuring plan.
CNN
