Greek Prime Minister George Papandreou said on Wednesday his debt-stricken country was not seeking European taxpayers' money but needed a breathing space to cut its budget deficit and borrow on normal conditions.

He made the comments after European Union finance ministers told Greece it will have to take additional austerity measures to achieve steep deficit reduction targets this year.

We haven't asked for money from German, French, Italian or any other taxpayers, Papandreou told a cabinet meeting. What we want is political support to end profiteering and the defamation of our country.

His remarks came amid mounting opposition in Germany and other northern European countries to any bailout for Greece, which is struggling with a debt mountain set to reach 120 percent of gross domestic product this year.

What we have asked for is the time we need to apply our programme, which will give us credibility and allow us to borrow at normal conditions, Papandreou added.

German Chancellor Angela Merkel, facing strong public hostility to any financial assistance for Athens, told a political rally it would be a disgrace if banks that had brought the global financial system to the brink of collapse turned out also to have helped Greece falsify its budget figures.

She was referring to disclosures that U.S. investment bank Goldman Sachs arranged a derivatives deal for the Greek government in 2001 that enabled it to conceal the extent of its deficit by deferring interest payments.

Greek Finance Minister George Papaconstantinou told parliament in Athens that the swap deal had been entirely legal and compliant with EU rules at the time.

Debt markets gave stressed governments on the euro zone's southern rim a breather on Wednesday.

SPANISH STAMPEDE

Spain drew a stampede of demand for a government bond issue and Portugal's borrowing cost fell in signs that market fears of sovereign risk in the euro zone may be easing, at least for now.

Analysts said a successful Spanish sale could open the door for Greece to launch a planned 10-year bond after European Union leaders pledged support last week for Athens' plans to shrink its huge budget deficit but stopped short of financial aid.

Greece needs to sell some 53 billion euros in debt this year, including at least 20 billion in April and May, and is looking for EU support to reduce its borrowing costs.

Good news in the euro zone periphery is also good news for Greece, said Leonidas Fragiadakis, group treasurer at National Bank of Greece, the country's biggest bank.

The premium investors charge for buying Greek bonds rather than benchmark German bunds narrowed to around 315 basis points from 321 late on Tuesday.

However, UBS strategist Justin Knight cautioned that markets would continue to charge a higher premium on Greek borrowing until they had some clearer indication of what financial support the EU was prepared to offer.

Some kind of more concrete commitment by EU leaders on possible aid to Greece is what would provide a much more benign environment for Greek bond issuance, Knight said.

RESPITE

Greece's Socialist government gained a temporary respite on the social front when tax officials called off the latest of a series of one-day strikes against austerity.

On Tuesday, farmers ended a 30-day protest despite failing to win any extra state handouts, abandoning their last road blockade near the Bulgarian border.

In another boost, Greek budget revenues in January exceeded the country's target, helped by a one-off tax on big corporations, preliminary finance ministry data showed.

Papandreou is juggling market forces and domestic constraints as he seeks to enforce a public sector pay freeze, welfare cuts, tax rises, pensions reform and public spending curbs in a recession without sparking social unrest.

In a reminder of the violent fringe in Greek politics, two small bombs exploded within 24 hours in Athens, causing minor damage but no casualties.

The first exploded outside the offices of U.S. investment bank JP Morgan late on Tuesday. The second, on Wednesday evening, went off outside the political office of the Greek minister in charge of police. No one claimed responsibility.

EU finance ministers have discussed options such as conditional bilateral loans or guarantees for Greek borrowing but come to no conclusion, and are holding off on any move to maintain pressure on Greece to deliver on deficit reduction.

However, opinion polls and political comment in fiscally conservative northern euro zone countries suggest a hardening of opposition to any bailout.

A staggering 92 percent of Dutch people want Greece to leave the European single currency, according to an opinion poll in the Dutch daily De Telegraaf on Wednesday.

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