German politicians came under pressure today to cast aside their doubts over a bailout for Greece, with markets increasingly alarmed that Athens may default on its debt and trigger a meltdown elsewhere in Europe.
The heads of the European Central Bank and International Monetary Fund were both due to brief German politicians about the growing crisis that is pounding global stocks and driving up borrowing costs for several euro zone countries.
European Commission officials dismissed any talk of a restructuring of Greece's debt mountain, which totalled 115 per cent of gross domestic product last year and is projected to push even higher as Athens struggles to tame its huge deficit.
However, the spread between Greek and German bonds hit record highs today and the cost of insuring Greek debt rose above Venezuela's, according to CMA Datavision, suggesting the market believes Greece is more likely than not to default.
Greece has asked for as much as 45 billion euros ($59.94 billion) in emergency loans from its euro zone partners and the IMF. Investors, fearing the Germans in particular are dragging their feet, are urging swift implementation of a bailout.
"The chances of a default by the Greek government are increasing not by the day but by the hour. If the IMF and European governments don't come up with something quickly, then I see the market going down further quite rapidly," said Koen De Leus, economist at KBC Securities.
The euro hit a one-year low against the dollar while European stocks fell to a seven-week low.
Rating agency Standard and Poor's slashed Greek debt to junk status yesterday and also downgraded Portugal, raising concerns the crisis may engulf other heavily indebted EU states.
European Central Bank Executive Board member Juergen Stark said EU governments must move rapidly to put their finances in order, adding that current fiscal policies were not sustainable.
"The onus is now on governments to ensure that the crisis that initially affected the financial sector, and subsequently the real economy, does not lead to a full-blown sovereign debt crisis," Stark said.
"Averting it will require very ambitious and credible fiscal consolidation efforts. In fact, substantially stronger consolidation efforts than those conceived so far."
Glaxo, headquartered in Brentford, west London, stressed that sales remained positive even without swine flu, up 4 per cent on an underlying basis.
The group added it was continuing to reduce reliance on "white pills/western markets" to help reduce volatility seen with some of its treatments.
Sales from these developed markets rose 27 per cent in the first quarter, down from 32 per cent a year earlier.
The impact of generic rivals was clear, with first quarter sales of its antiviral Valtrex slumping by 46 per cent in the quarter after competition came on stream in November 2009 following a patent expiry.
Valtrex is expected to suffer further declines as more rivals enter the fray.
Glaxo also faces headwinds from government spending cuts, especially in the US as it drives through healthcare reforms.
Andrew Witty, chief executive of Glaxo, said the US healthcare changes would result in discounts for medicines related to government programmes.
But he said this had been absorbed in the first quarter and would continue to be offset through "improved operational performance".
"The transformation we have already instigated within our US business has been focused on ensuring we are fit to compete in the environment caused by the reform," he added.
Glaxo was given a welcome fillip last year from demand for swine flu treatment, coming at a tough time for established drug companies.
It helped Glaxo return to annual sales growth last year for the first time since 2007, with underlying pre-tax profits up 12 per cent to £8.7 billion in 2009.
Today's better than expected figures saw the group buck wider falls in the market with shares up more than 1 per cent.