Europe faces prospect of new Greek aid calls

Greek Prime Minister Georges Papandreou on Saturday urged "the EU in particular, to leave Greece in peace to do its job," after Finance Minister George Papaconstantinou warned at G20-eurozone talks in Luxembourg late Friday that Athens needs "breathing space."

But both national and specialist financial media reports raised the possibility that the government may yet come calling for fresh European Union funds on top of the 110 billion euros ($160 billion) agreed a year ago.

The resurrection of the Greek debt conundrum comes days after a 78-billion aid package was agreed with Portugal and fresh from a 67.5-billion international rescue for Ireland.

Officials denied denied the Luxembourg talks represented a sharp deterioration.

Such meetings "take place at irregular intervals," a German government source told AFP.

"This was not a \'crisis meeting on Greece\'," Amadeu Altafaj, spokesman for European Union Economic Affairs Commissioner Olli Rehn, also said.

Reports said ideas under discussion include postponing the maturity of 65 billion euros worth of Greek bonds this year and next, and pushing back deficit reduction -- said to be unacceptable in Berlin.

The Greek public deficit for 2010 was recently revised upwards, from 9.4 percent of gross domestic product to 10.5 percent.

The Kathimerini daily said Athens would need "two to four years" more than planned to meet a three-percent-of-GDP EU ceiling.

"We think that Greece does need a further adjustment programme," said Luxembourg Prime Minister Jean-Claude Juncker, who chairs the Eurogroup of finance ministers.

His spokesman Guy Schueller clarified that means "additional measures as much on income as expenditure," rather than new EU money being pumped in, although he did not rule out "eventual adjustments of conditions" attached to the existing bailout.

Juncker said the details would be discussed at a two-day meeting of eurozone and EU finance leaders in Brussels on May 16 and 17.

A deeper-than-anticipated national recession has combined with brutal cuts in public spending to hack away at Greek tax revenue, with the country\'s top crimebuster given new orders to focus on fiscal fraud.

Greece was already given eased terms by EU leaders in the spring and a new rejig would leave the issue weighing on EU partners\' finances into the next decade.

Athens already owes more than a year-and-a-half of its entire economic output, some 340 billion euros.

Greece was due to return to commercial borrowing markets next year, but with current yields on benchmark 10-year bonds hitting 15 percent -- junk level compared to Germany -- "it is in a pretty catastrophic situation," according to a source close to the talks.

The Greek government said the idea it could withdraw or be kicked out of the eurozone was "completely untrue... provocative... (and) highly irresponsible," but the tension nonetheless leaves the EU struggling to close off a sorry chapter at a late-June summit.

As well as Juncker, Papaconstantinou and Rehn, the Luxembourg talks brought together Germany\'s Finance Minister Wolfgang Schaeuble, France\'s Christine Lagarde, Italy\'s Giulio Tremonti and Spain\'s Elena Salgado, and European Central Bank chief Jean-Claude Trichet.

On a meet-the-public walkabout to celebrate \'Europe Day\' in Brussels, EU president Herman Van Rompuy sought to remain above the fray.

"This is not a day for talking about the difficulties facing Europe, this is a day of joy," he told AFP.

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