–Adds latest data on Greek bond spreads; background on EMU/IMF aid plan

ATHENS (MNI) – The Greek government Friday requested that the aid
plan offered jointly by its Eurozone partners and the International
Monetary Fund be formally activated, Prime Minister George Papandreou
announced moments ago.

The move had been widely expected with Greek bond yields soaring to
record levels in the last 24 hours, making borrowing for the government
untenably expensive.

“A few minutes ago I asked the finance minister to officially
request the activation of the [aid] mechanism,” Papandreou said in a
brief televised statement from the Greek island of Kastellorizo, where
he is visiting.

Papandreou said that requesting the aid had become “imperative and
of national importance.”

He did not specify whether there would be separate requests to the
EMU and to the IMF, and he provided no specifics about how the aid would
work or what the conditions on it would be. A briefing on the matter by
the Greek Finance Ministry is scheduled for 10h45 GMT.

The prime minister made clear that the decision to request aid now
was driven by the very recent sharp rise in spreads on Greek debt.

“The Greek government had hoped that agreement on the Eurozone aid
mechanism would have been enough” to bring spreads down and for “markets
to calm down.” However, “markets have not responded, either because
they did not fully believe the Eurozone plan or because” of profit
seeking motives, Papandreou said.

He said recent market events left no choice other than to activate
the mechanism. “High interest rates are jeopardizing our efforts,”
Papandreou said. “We will not allow this.”

He added: “The markets did not give us any time.”

The prime minister said Greece has embarked on a “new Odyssey, but
the ship will be rebuilt now with stronger material and Greece will
reach its target safely and more sure.”

Through reform and restructuring, Papandreou said, Greece would
work its way out from under the strict surveillance and control of its
European partners.

After hitting an all-time record high of +590 basis points earlier
today, the spread between Greek 10-year bonds and their German Bund
counterpart narrowed sharply on the news that Greece was formally
requesting aid. At one point shortly after the announcement they were a
full 100 basis points below the days high at +490 bps.

Subsequent comments by a European Commission spokesman that seemed
to leave the door open to a restructuring of Greece’s debt pushed the
spread back up to 506 basis points, well below the day’s high but still
extremely high in historical terms.

The Eurozone countries have agreed to lend Greece up to E30 billion
in the first year of a three-year assistance program. The IMF would
contribute an additional amount, believed to be in the range of E10
billion to E15 billion. Talks are taking place in Athens among Greek
officials, the ECB, IMF and European Commission over the details of such
aid – including the conditions that will be attached to it.

Disbursing the aid will require unanimous approval of all the
Eurozone countries, which means parliamentary debate and approval in
many cases – including Germany.

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