Greece is not discussing a bailout with other European Union countries, Greek Finance Minister George Papaconstantinou said on Tuesday, when financial markets gave his emergency deficit-cutting plan a thumbs down.
Speaking following a meeting with his French counterpart in Paris, Papaconstantinou also said his country was doing everything necessary to reduce its public deficit.
"There is no question of a bailout. There is absolutely no question of a bailout and we are not discussing that with our (European) colleagues," he told reporters.
"Greece will do what is necessary to reduce its public deficit," he said before heading to London to meet with investors and his British counterpart.
Investors sold down Greek debt and bank shares on Tuesday, as workers launched protests against planned austerity.
The reaction highlights the tightrope walk facing Greek Prime Minister George Papandreou, elected in October after promising to tax the rich and help the poor, as he tries to calm markets while catering to restive voters.
The risk premium on 10-year government bonds jumped to 257 basis points above benchmark German bonds from 231 on Monday after Papandreou outlined his plan to slash the huge budget shortfall by curbing welfare spending and raising taxes.
The Athens stock exchange lost 2.12 percent by mid-afternoon and bank shares were down nearly 3.5 percent. Analysts said the economy needed much more potent medicine.
Ratings in focus
Asked about the reaction of markets on Tuesday, Finance Minister Papaconstantinou said the markets were "watching us with close attention, waiting to see that the announcements get translated into action and it is evident that it is quite difficult to be convincing before that happens."
Turning to the prospect that ratings agencies other than Fitch Ratings downgrade the nation's sovereign rating, Papaconstantinou said he hoped this would not happen.
"We are speaking with all the agencies but it is a medium-term effort that we are working towards. It is not an effort which will translate (into action) very quickly."
Greece plunged into crisis last week when Fitch Ratings cut the country's sovereign credit rating to below A grade, the lowest in the euro zone, for the first time in a decade.
A team from Moody's, which has Greece's outlook on negative watch, was in Athens on Tuesday to meet government officials.
Euro zone leaders and most bank analysts say there is no prospect of Greece defaulting on its debt. However, the cost of insuring Greek government debt against default rose on Tuesday.
European Central Bank governing council member Nout Wellinck said the markets would force Greece and other problem countries such as Spain and Portugal to clean up their public finances.
"We are all worried about these countries, but at some point in time they will be forced to correct things -- not only by other governments but also by the markets simply because budget deficits are becoming problematic," he told Dutch television.
"Next Lehman Brothers"?
Even the steps he unveiled were too much for some trade unionists in a country with a history of labour militancy, with protesters blocking the Finance Ministry entrance on Tuesday.
Political analysts said the major labour unions were also likely to mobilise members to fight the government's measures.
The European Commission called the plan a step in the right direction but said concrete measures for a quick consolidation of public finances need to be spelled out in a detailed stability programme next month.
The president of Germany's Ifo institute said Greece could become "the next Lehman Brothers", the U.S. investment bank whose bankruptcy in Sept. 2008 triggered global financial turmoil. But Hans-Werner Sinn said the euro zone would not break up due to Greece's debt, forecast to hit 135 percent of GDP in 2011 barring policy changes.
Economists forecast more turbulence for Greek markets and questioned whether some of the proposed savings would help cut the deficit to the EU limit of 3 percent of GDP in 2013.