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GREECE PLUNGES DEEPER INTO CRISIS, BANKS, EURO HIT

By NBF NEWS
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Markets pounded Greek bonds and banking stocks on Thursday, driving the debt-stricken euro zone member's borrowing costs to new highs and pushing it closer to tapping a last resort European Union/International Monetary Fund safety net, Reuters reported.

The government struggled to reassure markets it can stay solvent after the premium investors demand to buy Greek rather than the benchmark German government debt surged for the third day in a row to a record high since Greece joined the euro.

But skepticism at a dearth of details surrounding the European Union and International Monetary Fund lifeline continued to pile pressure on a country already struggling to cover its wide fiscal gap and huge public debt load.

Chris Pryce, senior Greece analyst for rating agency Fitch, said Athens' only choice now was to ask for help.

'Despite everything the EU and the euro zone have done there is still a lack of clarity (and) confusion about what they intend to do, when they intend do it and how much would be involved,' he told Reuters.

'It is now up to the Greek government to go publicly to the EU and IMF and ask for the cash and the support.'

Greece's government has pledged to cut its public finance deficit by almost one third to 8.7 per cent of gross domestic product this year, but is also wary of sparking public unrest after a string of riots and strikes since last year.

Reluctant to give in to the pressures, Greece insists it prefers to borrow from markets and will use the European Union/International Monetary Fund safety net agreed only as a last resort, a call it repeated on Thursday.

'For the time being it is not necessary to activate the aid mechanism. The EU/IMF safety net is there to guarantee that Greece is not alone,' said spokesman George Petalotis, adding Athens was striving not to borrow at 'barbaric' interest rates.

But the 10-year Greek/German government yield spread spiked almost half a percentage point to as much as 463 basis points on Thursday.

Two-year Greek government bond yields surged more than 100 bps to almost eight per cent

'Spread levels today are insane, they are not levels for a euro zone country,' said Panagiotis Dimitropoulos, treasurer at Millennium Bank in Greece. 'It seems Greece is being pushed toward the aid mechanism.'