Three weeks away from potential default, Greece saw its borrowing costs spiral higher once again Wednesday, a day after ratings agency Standard & Poor's downgraded the country's bonds to junk status.
Stocks around the world tanked after the downgrade by S&P, which also lowered its rating on Portuguese bonds by two notches, indicating Greece's financial troubles are spreading to other eurozone countries.
The interest rate gap, or spread, between Greek and benchmark German 10-year bonds spiked to 7.7 percentage points, meaning Greece would face rates of above 10 percent if it tried issuing bonds now. The higher the gap, the less confidence in Greece.
Athens has called for aid from a euro45 billion joint eurozone and International Monetary Fund rescue package that would provide loans to Greece at a rate of about 5 percent. But Germany has been reluctant to release funds, saying Greece must take more austerity measures first.
The heads of the IMF, the European Central Bank and other financial institutes were to meet with German Chancellor Angela Merkel in Berlin later Wednesday. Markets will be watching the meeting for a positive signal. German Finance Minister Wolfgang Schaeuble has insisted Germany will not let Greece fail.
Greece urgently needs money within the next three weeks, as it has 8.5 billion euros ($11.24 billion) worth of a 10-year bond maturing on May 19. Finance Minister George Papaconstantinou said late Tuesday that Greece would "absolutely and without any doubt" be able to service its debt by that time.
"Everyone now understands that there is no more time for delay," he said on an evening TV news program, adding that there was no chance Greece would restructure its debt.
"The idea of restructuring debt is outside every negotiation. I am categorical on this point," Papaconstantinou stressed.
He said negotiations currently under way with the IMF, the European Central Bank and the European Commission on hammering out the details of the rescue package should be completed within days, probably before Sunday.
European Union President Herman Van Rompuy, speaking from Tokyo on Wednesday, said the negotiations are "well on track" and that he plans to hold a summit around May 10 for eurozone leaders to activate the rescue plan.
"The negotiations are going on. They are well on track, and there is no question about restructuring of the debt," Van Rompuy said.
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