Debt-burdened Greece drew strong demand for a crucial bond issue on Thursday but paid a steep risk premium that underscored its plea to Germany and other EU partners for support to help lower its borrowing costs.

A day after the government announced draconian new austerity measures, a 5 billion euro 10-year syndicated bond was more than three times oversubscribed at a final price of about 6.4 percent -- twice what Berlin pays, banking sources said.

The European Commission and EU governments praised the latest round of pay cuts, pensions freeze and tax increases designed to stem a debt crisis that has shaken the euro zone. Greek labor unions responded angrily.

The main private and public sector unions called a 3-hour strike and demonstrations for Friday while communist trade unionists occupied the finance ministry and prevented staff from entering the building.

Athens needs to borrow 53 billion euros ($72 billion) this year to repay existing debt and cover its huge budget deficit. The cost will be crippling if it has to go on offering such a high premium over benchmark German bonds.

We are compensating the markets to re-enter, the head of the country's debt agency, Petros Christadoulou, told Reuters.

Prime Minister George Papandreou will meet German Chancellor Angela Merkel on Friday, looking for more explicit support to help reduce Greek borrowing costs, but Berlin has lowered expectations by saying financial assistance is not on the table.

French Finance Minister Christine Lagarde told reporters that Paris and Berlin have been working on ways to help Greece but it's not on the agenda at the moment.

Of course we have worked on solutions, but we don't need to bring them out now, she said.

EU Economic and Monetary Affairs Commissioner Olli Rehn said euro zone nations would take coordinated action to guarantee stability if necessary, and prevent any spillover of Greece's debt crisis to other members with serious budget problems.

Rehn told Italian newspaper Corriere della Sera the 4.8 billion euros in extra savings announced on Wednesday were sufficient for 2010 providing they are applied fully.

But further on, in 2011 and 2012, further measures will be necessary for Greece ... for medium-term consolidation, he said.


Greek Deputy Foreign Minister Dimitris Droutsas pleaded on German radio for more visible support to enable Greece to borrow more cheaply but insisted it was not requesting direct financial aid.

What we need from our EU partners and from such an important EU partner as Germany, is an explicit, clear signal to the international financial markets that Greece and the Greek government have their full confidence, he told Deutschlandfunk.

Thursday's bond issue was a crucial test ahead of a period between April 20 and end May when Athens needs to borrow or refinance 20 billion euros.

European government sources have said Germany and France are working on contingency plans under which state-owned financial institutions would directly purchase billions of euros in Greek bonds or offer guarantees to commercial banks that bought them.

Droutsas noted that with current interest rate premiums, Greece would have to pay 750 million euros more in interest on a five billion euro loan than Germany would.

We're trying to bring these borrowing costs down and for this we need the trust of the international financial markets. We're earning this with these measures which we have announced, he said.

A Reuters poll on Tuesday, before the latest measures were announced, showed economists were skeptical about Greece's ability to cut its deficit this year. Only 18 of 47 respondents said they believed Athens would achieve the promised target of a reduction by four percentage points of GDP.

The European Central Bank praised Greece's third savings package in as many months.

ECB chief economist Juergen Stark, a stickler for fiscal discipline who has been one of Athens' harshest critics, said Wednesday's measures were a big step that goes beyond, well beyond what was asked for.

There is a change in the Greek government's attitude, he told the German daily Die Welt. We are very confident that the Greek government will meet its budget goals.

(additional reporting by Angeliki Koutantou, Tatiana Fragou and Ingrid Melander in Athens and George Matlock in London; writing by Paul Taylor; Editing by Ruth Pitchford)