IMF advisors began talks in Athens yesterday to help Greece enact huge budget cutbacks just as the climate around its debt crisis worsened, driving the euro down further.

The IMF advisers began talks with Finance Minister George Papaconstantinou amid great tension on financial markets over Greek strategy to raise funds urgently to fund a massive budget deficit and redeem old debt falling due.

In London, the euro fell further, driven down again largely by anxiety over the Greek crisis, and was being quoted at $1.3387 from $1.3397 late on Tuesday.

At Credit Agricole CIB, analyst Stuart Bennett said that the euro continued to be undermined by the situation in Greece, which faces a deepening dilemma of huge debt, dangerously high interest rates and damaging market rumours.

The International Monetary Fund experts are officially on a mission to advise ministers on how to manage budget cutbacks and clamp down on tax fraud in line with targets imposed by the European Union.

"During this technical assistance visit, the IMF is expected to analyse and make suggestions on budget and tax issues," the finance ministry said.

The IMF mission was requested by Greece as it battles huge budget deficits and a debt mountain of nearly €300 billion.

Athens has set itself an enormous task of slashing its budget deficit by four percentage points this year in the midst of a growing recession.

But at the same time the market interest rates it has to pay on its debt have jumped up, soaking up much of the intended savings.

The rate or yield, which had leapt to slightly above seven per cent on Tuesday, eased yesterday to 6.883 per cent.

This is still sharply above the level Greece considers bearable, and at BNP Paribas in London, analysts commented "the situation is very fragile" and that a swirl of rumours was "weighing heavily" on Greek bonds.

"The strong rise in yields raises concerns about the cost of debt for Greece," they said.

At Capital Economics in London, analyst Jonathan Loynes commented that "the latest rise in yields is a major blow to hopes that Greece might yet manage to muddle through on its own."