Greece said yesterday it could call on loan back-up from the EU and the IMF by next month as its bond yields hit a record high and it was forced to once again pay steep rates to borrow money.
The Greek Finance Minister insisted that the recession-plagued economy would not be "left hanging" while seeking to raise fresh loans in May and that it "will find funds" through an EU-IMF loan guarantee mechanism if necessary.
The loan guarantee can be "quickly" adopted and will give access to short-term loans, Finance Minister George Papaconstantinou told a news conference.
But he repeated that Greece will request its activation "when we deem it necessary, and that will depend on loan conditions and the progress of talks" with officials from the European Union, European Central Bank and International Monetary Fund which start today in Athens.
The Greek government needs to raise around €10 billion in May to keep up its debt and budget payments. On top of its urgent borrowing needs, the government faces new strikes this week over its budget austerity measures.
Yesterday it sold €1.95 billion worth of three-month Treasury bills but at over double the cost of its last comparable issue, a recurring feature in its recent paper offers.
The joint mission of EU, ECB and IMF staff numbers 20 people and will remain in Greece for around 10 days, the minister said.
The meeting was initially due on Monday but the air chaos in Europe caused by the volcanic eruption in Iceland pushed it back to today.
The EU-IMF rescue deal is worth up to €45 billion at around five per cent interest rate in the first year.
But the government last week called for talks on a "multi-year programme of economic policies." Its overall debt stands at nearly €300 billion.
Mr Papaconstantinou added that he will travel to Washington on Friday for a scheduled members' meeting of the IMF taking place on Saturday and Sunday where he will meet IMF director Dominique Strauss-Kahn.
Earlier yesterday Greece raised €1.95 billion in Treasury bills drawing major demand after originally seeking to raise €1.5 billion.
The Greek debt management agency said that buyers were offered a uniform yield of 3.65 per cent compared to 1.67 per cent in the last three-month bill issued in January.
The auction - the third in a week - comes after the rate of return on Greek 10-year government bonds rose to a record of 7.807 per cent yesterday.
The yield was already at 7.618 per cent late on Monday - way beyond the level that Greece can afford to pay if it is to get through its debt crisis.
Last week, the government drew strong demand for one-year and six-month bills but had to offer high interest rates despite the EU-IMF stand-by rescue guarantee, which was intended as a shield against steep borrowing rates.
German central bank governor Axel Weber has said Greece may need up to €80 billion in financial aid to avoid default, the Wall Street Journal reported.
Greek Prime Minister George Papandreou on Monday said he would not hesitate to ask for a debt rescue from the EU and IMF if he deemed it to be "in the national interest".
The government is labouring to reduce its debt and cut its budget deficit, currently at over €30 billion or at least 12.9 per cent of output, by an unprecedented four percentage points this year.
It is implementing spending cuts and tax hikes worth around €16 billion this year, angering labour unions which have staged general strikes and a series of work stoppages.
The entire public sector will shut down on Thursday as civil servants hold another 24-hour strike. Another union representing Communist workers has called a 48-hour strike from today.
State-employed doctors are on a 48-hour strike today.
The largest Greek union, which represents the private sector, has also indicated plans for industrial action later this month.
The country is already caught in a deepening recession, and the state statistics office yesterday said unemployment had increased to 11.3 per cent in January with over 560,000 people out of work, a 12.3 per cent rise on December.