Iceland's volcanic ash cloud had another surprise casualty Monday: Crippled European air travel delayed Greek bailout talks, leaving the country to watch its borrowing costs hit another record high.
Government officials said crisis negotiations with the International Monetary Fund and the European Union would now start Wednesday and could be held by teleconference if planes remain grounded after that.
"This discussion is very important, because it will allow us, if the Greek government asks for the mechanism to be activated, to move extremely fast," Finance Minister George Papaconstantinou said.
The two-day delay came amid fresh market uncertainty after the failure by European finance ministers to spell out further details of their bailout plan for debt-strapped Greece during a weekend meeting. As a result, bond markets have sent rates on Greek bonds up again.
The higher rates demanded by the market are threatening Greece's effort to dig out from under its debt pile of 300 billion euros ($406 billion) and avoid a default.
Greece's debt woes have undermined the euro currency and raised fears they may spread to other euro zone countries with weakened finances, such as Portugal and Spain, which would then faces elevated borrowing costs. The EU bailout proposal was an attempt to stop the government debt crisis and get borrowing costs to return to normal.
But on Monday, the interest rate gap, or spread, between Greek 10-year government bonds and their benchmark German equivalent reached record levels of 4.63 percentage points.
Weighed down by bank stocks, shares on the Athens Stock Exchange sank 2.56 percent with the bourse's general index closing at 1,944.1.
IMF and EU negotiators are to discuss details of the standby loan package, which Athens says it may use if borrowing costs bond yields are too high. Greece will test the bond market Tuesday, with a 13-week Treasury bill auction, seeking to raise 1.5 billion euros ($2 billion).
Members of the IMF delegation have already arrived in Athens, Finance Ministry and IMF officials said, but would hold no formal meetings until negotiators from the EU Commission and European Central Bank were also ready to participate in talks.
"Activation of the European support mechanism — when, and of course, if that happens — does not mean bankruptcy," Government spokesman Giorgos Petalotis said.
"This mechanism was created ... to avoid adverse borrowing conditions. If such a mechanism had not been created, the chances of bankruptcy would have been very high."
Petalotis said negotiations could be held by teleconference in case of further delays.
Greece's partners in the euro zone have promised Athens 30 billion euros ($40.6 billion) in standby loans. But doubts over key details have added urgency to negotiations with the IMF to determine its role in a joint bailout deal.
Prime Minister George Papandreou said Athens was seeking to achieve "the fullest support mechanism" possible.
"If the country's interests dictate that we use the support mechanism, we will do so without hesitation," Papandreou said.
Jean-Claude Juncker, the head of a group of finance ministers from the 16 countries that use the euro, insisted that IMF involvement in the bailout package would be under "European leadership," easing widespread Greek fears that the fund would demand draconian austerity cuts.
"It's the first time the IMF is asked to give assistance to a member country of the euro-area, so this has created some methodological problems, which of course will be sorted out between the Commission and the IMF," Juncker said in a weekend interview with Greek financial Web site euro2day.gr.
He ruled out the possible existence of two separate rescue packages — insisting there would be "one program, with one single conditionality." And he said Athens would decide at which point it had reached the "ultima ratio" or last resort, required to ask for assistance.
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