The European Commission denied today there was any European Union plan for €20-25 billion aid for Greece, and Germany's finance ministry said it had made no decision on aid for Athens.
They were reacting to a report in German weekly Der Spiegel on Saturday that Germany's finance ministry had sketched out a plan in which countries using the euro currency would provide aid.
"There is no such plan because Greece has not requested a single euro in financial aid," European Commission spokesman Amadeu Altafaj told a news conference in Brussels
In Berlin, a finance ministry spokesman told a news conference Germany had not made a decision on aid for Greece but expected the debt-ridden country to be able to refinance in April.
Greece's central bank governor meanwhile said the country was prepared to take extra fiscal steps to make sure it meets its deficit-cutting targets though he said financial markets were over-reacting to the country's financial woes.
"Even if some risks materialise - like (poor) growth - the government is prepared to take immediate corrective action," George Provopoulos, also a member of the European Central Bank's Governing Council, told Bloomberg in an interview.
"The government has said already on several occasions that it will take any additional measures required in order to achieve its goal," he said.
Der Spiegel had reported that "initial considerations" by the German finance ministry were for financial aid for Greece to be calculated according to the proportion of capital each country holds in the European Central Bank. Greece has pledged to reduce its budget deficit by 4 percentage points to 8.7 per cent of gross domestic product (GDP) in 2010. Spreads of Greek government-bond yields over German bunds have surged since October.
In another Der Spiegel report, Greek prime minister George Papandreou told Germany he was not seeking aid, and criticised the Commission for failing to ensure member states adhered to the EU's Stability and Growth Pact that limits budget deficits.
"The union could in the past have more rigorously policed whether the stability pact was being observed - with us too. In future we should allow the European statistics office direct access to individual member states' data."
"We suggested that, but not all countries wanted to have so much transparency," Papandreou said.
The premium investors demand to buy 10-year Greek government bonds rather than German benchmarks fell today as markets continued to speculate on the prospects for a bailout.
The 10-year Greek/German government bond yield spread narrowed by three basis points on the day to 314 bps, the narrowest since February 17th.
In his comments to Bloomberg on the way financial markets were reacting, Mr Provopoulos was quoted as saying: "They take advantage of the weak link to make profits."
"It's clear that there is a certain degree of overshooting. Given the high degree of uncertainty in the markets, one should not expect that the situation will normalise overnight."
Greece's deficit swelled to 12.7 per cent of gross domestic product in 2009, way above the EU's cap of 3 per cent, and Athens needs to sell some €53 billion of debt this year, including at least €20 billion in April and May.
Reuters