European finance ministers discussed Greece's debt crisis on Friday but said Athens was seeking to clarify how an emergency aid mechanism would work, rather than requesting it.

Greek Prime Minister George Papandreou told parliament that any request to activate the 40-45 billion euro ($56-$63 billion) financial aid package announced by euro zone governments would be made in the country's best interest if needed.

We are taking all the preparatory actions required, said Papandreou, whose Socialist government has announced drastic austerity measures in a bid to slash its deficit and allay financial market fears about its ability to honor its debts.

Euro zone finance ministers announced last Sunday that they had agreed an emergency loan facility Greece could tap if needed and that the International Monetary Fund could chip in to what would be the first rescue of a euro currency country.

As it struggles to refinance a debt bigger than its economic output, Greece moved closer to activating that aid when it said on Thursday it was seeking talks with European authorities and the IMF, which will send teams to the country on Monday.

It is a matter of preparing a joint program of conditionality and financing if needed and if requested, European Monetary Affairs Commissioner Olli Rehn said.

Rehn was attending a string of meetings of European finance ministers and central bankers in Madrid, where Greece was due to review latest developments with its European peers.

There are no indications that Greece will ask for help today, said Jean-Claude Juncker, Luxembourg prime minister and chairman of the first meeting in Madrid on Friday, involving ministers from the 16 euro currency countries and Jean-Claude Trichet, head of the European Central Bank.

Financial markets, where Athens needs to roll over some 53 billion euros of sovereign debt this year with a big chunk before May 19, remained nervous, with Greek 10-year bond yields rising to 7.3 percent on Friday.

That pushed the 10-year Greek/German government bond yield spread -- the premium investors demand to hold that debt over what they require to buy safer German bonds -- to 425 basis points from 415 basis points at Thursday's settlement, Tradeweb data showed.

The euro retreated against the dollar, snapping a five-day winning streak.

In a letter to the European Union, the European Central Bank and the IMF released to the media on Thursday, Greek Finance Minister George Papaconstantinou proposed discussions on a multi-year program of economic policies.

An new opinion poll released on Friday showed support for Prime Minister Papandreou had risen even if his voters were unhappy about austerity measures that include pay freezes and tax increases to try to stabilize the country's debt.

Two thirds of Greeks are dissatisfied with the government's performance but still overwhelmingly support it over the conservative opposition, while support for Papandreou himself rose to 68 percent, from 66 percent in March, the poll conducted by Public Issue for Skai TV showed.

German Finance Minister Wolfgang Schaeuble, who stayed away from the Madrid talks, said in an interview on German radio he hoped Greece stood a chance of pulling through without help.

We still believe that the Greeks are headed in the right direction, and that in the end, they will not need to demand the aid at all, perhaps, he said, according to a transcript of the interview with Germany's Suedwestrundfunk.

Essentially, Greece and its potential rescuers are trying to make sure everything is in place for if and when emergency help has to be rolled out.

FIRST STEPS

Spanish Economy Minister Elena Salgado said it remained to be seen whether that would happen but that Athens was taking the necessary precautions.

Greece has been in the first steps but it's up to them to continue, said Salgado, whose country was hosting the meeting in Madrid on Friday and Saturday because it holds the rotating presidency of the European Union.

Papandreou said he remained committed to the drastic reforms needed to turn the country around and that austerity measures were painful but necessary.

True, the measures hurt. But think of what would have happened if we had entered a state of bankruptcy and if we had not been able to borrow, he said.

If the country had gone down, it wouldn't have hurt the rich, it would have primarily hurt the average Greek and the weak.

(Additional reporting Nigel Davies, Paul Carrel, Gavin Jones, Krista Hughes, Jan Strupczewski in Madrid, and Renee Maltezou in Athens; Writing by Brian Love; Editing by Dale Hudson)

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