ATHENS, Greece — Interest rates on Greek 10-year bonds climbed to new records Thursday amid concerns that demands for collateral in return for rescue loans could undermine the country's latest rescue package.
The bond yield climbed to above 18 percent, with the difference between the interest rates on Greek and German ten-year bonds, known as the spread, stretching to more than 16 percentage points.
Greece has been relying since last year on funds from a €110 billion ($159 billion) package of bailout loans from other European Union countries and the International Monetary Fund. On July 21, European leaders agreed on a second bailout, worth an additional €109 billion.
Finland, which saw a nationalist, anti-bailout party win a large share of the votes in national elections earlier this year, struck a deal to secure cash guarantees from Athens in return for its bailout contribution.
The Finnish deal needs to be approved by the other eurozone countries in order to go through, but if it does another four countries — the Netherlands, Austria, Slovenia and Slovakia — have said they will seek the same terms, throwing into question the future of the second bailout.
Other eurozone nations, including powerful Germany, which was the main contributor to the first rescue package, oppose the deal as it would be financed through the new bailout loans.
Finland has said it will not back down, although Prime Minister Jyrki Katainen said his government was open to amending details of the agreement.
Under the deal, Greece would put up hundreds of millions of euros as collateral for Finland to ensure the latter doesn't make a loss if Athens finds itself unable to pay back its loans and defaults on its debts. The cash and the interest it would generate would back Finland's contribution in the bailout.
Earlier this week, Austria said it will ask eurozone finance ministers to make sure the same collateral terms apply to all countries shouldering the Greek financial burden.
Foreign Minister Stavros Lambrinidis, on a visit to Stockholm Thursday, declined to comment on the ongoing EU talks.
"The important thing is to apply the decision of July 21 at a European level and for us in Greece to continue as we have been with a very, very difficult and painful fiscal consolidation and reform process," he said. "We are doing it, we shall do it, no buts, no ifs, no maybes."
The government has been struggling to meet the targets laid out in the bailout agreements, and has imposed a series of austerity measures such as increased taxes and cuts to public sector pay and other expenditure. It has also sought to attract foreign investment.
Germany's deputy economy minister, Stefan Kapferer, was in Athens Thursday to discuss investment, meeting with Development Minister Michalis Chryssohoidis.
Talks focused on investment opportunities in Greece — particularly in the fields of tourism and renewable energy — ahead of a visit in early October by German Economy Minister Philipp Roesler.
Kapferer also met Finance Minister Evangelos Venizelos, who said talks had included Greece's optimistic plans to sell off €50 billion worth of state assets by 2015.
"There is great interest from Germany" in the privatisation program, Venizelos said.
Seperately, Deputy Development Minister Haris Pamboukis resigned following a dispute in a Cabinet meeting over the recently abolished merchant marine ministry.
Government spokesman Elias Mossialos said Prime Minister George Papandreou accepted the deputy minister's resignation.
The ministry's role, structure and name has been changed several times in recent years. It was split up in the last Cabinet reshuffle in June, with part coming under the responsibility of the development ministry and part, such as the coast guard, going to the public order ministry.
According to state TV, a dispute broke out during a Cabinet meeting Wednesday, with Pamboukis arguing in favor of the existence of a separate marine ministry, and the public order minister, Christos Papoutsis, arguing against.
Nicholas Paphitis in Athens and Malin Rising in Stockholm contributed.
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