GREEK borrowing costs soared yesterday after Athens was forced to deny suggestions it had tried to renegotiate the rescue package hammered out by eurozone countries last month.
The spread between Greek and German 10-year Treasuries hit 406 basis points before falling back to 377 basis points, soothed by a statement from the government insisting it had not tried to backtrack on part of its emergency contract with the EU.
Ten year borrowing costs hit a record breaking session high of 7.161 per cent, a 0.5 per cent rise, before easing slightly to close at 6.995 per cent.
Finance minister George Papaconstantinou said: “There has never been any move on the part of our country to change the conditions of the recent agreement.”
Papaconstantinou said the deal, which would provide Greece with €22bn (£19.3bn) of loans from eurozone countries and the International Monetary Fund (IMF) if a default were to loom, was important to all parties.
Under the terms of the guarantee, Greece has to cut its budget deficit from 12.7 per cent of GDP to four per cent in 2010 and then below three per cent by 2012.
Earlier, there were fears Greece was trying to scrap the IMF’s involvement in the deal. The uncertainty sent the euro slipping 90 basis points against the dollar to $1.3369.
Jonathan Loynes, chief European economist at Capital Economics, said the surge in Greek bond yields underlines the difficulties Greece still faces. “With something close to €20bn of debt needing to be refinanced by the end of May, the latest rise in yields is a major blow to hopes that Greece might yet manage to muddle through on its own,” he said.