Greece's international lenders will pass judgement today on the country's austerity measures in an attempt to avert a sovereign debt default that is now said to be a 50:50 possibility.
The Greek government is also set to present new budget proposals to the chairman of eurozone finance ministers, including more than £5bn of extra tax rises and cuts as well as faster privatisation measures.
The "troika" of the European Union, the International Monetary Fund and the European Central Bank were hammering out the latest agreement with Athens last night.
The moves come after Jean-Claude Trichet, the chairman of the ECB, called on eurozone governments yesterday to consider setting up a finance ministry to co-ordinate responses to countries in financial distress.
The attempt to calm market fears about Greece followed a downgrade of the country's bonds by Moody's late on Wednesday.
The ratings agency said the chances of Greece defaulting on its debt were now evenly split. The downgrade took Greece's rating deeper into junk-bond territory and ranked it on a par with Cuba's.
Officials are working to agree a second bailout deal for Greece before a summit of EU leaders on 24 June. Greek officials hope the three international institutions will release a €12bn (£11bn) loan instalment the country needs to cover its immediate funding.
The IMF has warned that it will withhold its share of the loans this month unless a credible plan can be worked out to deal with Greece's 2012 funding gap. Germany and its allies want Greek bondholders to play a part in any rescue but the ECB is fearful that any restructuring of Greece's debt that hits bondholders could cause the crisis to engulf Spain – an event that would threaten the euro's survival.
Angela Merkel, the German Chancellor, insisted yesterday that the euro was a stable currency and that the eurozone's problems stemmed from the actions of countries that were highly in debt.
The eurozone has responded in piecemeal fashion as fears of contagion from Greece's crisis to other indebted countries have rocked bond markets. In a speech, Mr Trichet said: "Would it be too bold, in the economic field, with a single market, a single currency and a single central bank, to envisage a ministry of finance of the union?"
Mr Trichet is setting out his views on the single currency in the run-up to his retirement later this year.
He also wants the European Union to have powers to veto budget measures by countries that go "harmfully astray".
Athens signed up to a €110bn rescue package in May 2010 but the deal failed to halt an exodus of investors. Greece's €330bn debt at the end of last year was Europe's highest in relation to economic output.
The price of Greek 10-year government bonds fell yesterday, pushing up the yield demanded by investors by 12 basis points to 16.27 per cent. Irish and Spanish bond yields also rose.
Moody's said a Greek default was not inevitable but it cast doubts on the Athens government's ability to force through even tougher spending cuts and tax increases on voters.
"Greece is running out of options," the agency said. "Heightened implementation risks inherent in any new programme also increase the probability of a default event."
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