Greece's prime minister called on Friday for more solidarity from the European Union over the country's debt crisis and announced plans to visit Germany, whose backing would be vital for any EU financial aid.
George Papandreou said the worst fears about Greece's economy had been confirmed after an EU mission said Athens would miss its deficit-reduction targets unless it carried out more of the spending cuts that have sparked street protests.
Greece wants to restore investor confidence in its economic statistics and reassure buyers of its debt after revealing that the previous government understated its budget deficit by half. The EU has offered political support but no bailout.
We must do whatever we can now to address the immediate dangers today. Tomorrow it will be too late, and the consequences will be much more dire, Papandreou told parliament.
We ask the EU for its solidarity and they ask us to meet our obligations. We will meet our obligations ... We will demand European community solidarity and I believe we will get it.
Investors appeared to welcome the comments, pushing down the spreads between Greek bond yields and German benchmark issues -- a key measure of market faith in Greece's finances -- to below 340 basis points.
Greek stocks rose 1.4 percent and traders granted the euro a reprieve after knocking it to a one-year low versus the Japanese yen a day earlier. Still, many in the market expect the single currency to remain under pressure due to concerns about Greece.
Papandreou's office said the prime minister would visit Berlin on March 5 after an invitation from Chancellor Angela Merkel, but gave no other details.
Merkel's government has resisted appeals to promise Greece aid. Opinion polls show a majority of Germans oppose a bailout but many economic analysts believe Europe's largest economy will step in if it believes the stability of the euro is threatened.
Some of Greece's EU partners fear market volatility caused by Greece will spread to other countries that use the euro and have big deficits to cover, such as Portugal and Spain.
Investors who must decide whether to buy more Greek debt when it issues a new 10-year bond in the next few weeks are becoming increasingly anxious.
The prime worry is will Greeks have access to the sovereign debt market at any tolerable rate and that's what we remained concerned about, Chris Pryce, director of sovereign ratings at Fitch told Reuters Insider television.
Deutsche Bank CEO Josef Ackermann met with Papandreou and Finance Minister George Papaconstantinou on Friday but a Greek spokesman denied reports the German banking giant was considering buying 15 billion euros in Greek bonds.
Greece shocked its EU peers and markets when it revealed after a parliamentary election in October that its deficit would be 12.7 percent of gross domestic product in 2009, four times the EU limit.
It has drawn up EU-backed austerity measures, including tough wage and tax measures and pension reforms, to cut the deficit by 4 percentage points this year and under the 3 percent of GDP limit by 2012.
Its plans have caused protests that crippled transport and public services on Wednesday, when tens of thousands marched through Athens to protest against the plans.
But Papandreou said: Past policies make it necessary to proceed to brutal changes.
He could be preparing the ground for a new set of fiscal measures before a mid-March EU deadline to show results in cutting the deficit.
EU Monetary and Economic Affairs Commissioner Olli Rehn will visit Athens next week and is due to receive a report from EU inspectors who visited Greece this week with International Monetary Fund and European Central Bank experts.
A Greek finance ministry official said the inspectors anticipated Greece could cut the deficit by about two percentage points, far short of the 4 percentage point target this year.
This would mean additional measures aimed at savings of about 4.8 billion euros ($6.47 billion). The Greek economy contracted 2 percent last year in its first recession in 16 years.
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Athens is preparing its second bond issue this year, and officials have indicated it aims to do so in February or early March. Greece needs to raise about 20 billion euros to cover maturing debt in April and May.
Big German lenders including Deutsche Postbank, Eurohypo and Hypo Real Estate said they would not take on more Greek debt, which could make it harder for Greece to sell bonds to resolve its crisis.
The perceived lack of support from Germany and hostile German media coverage have upset Greeks and stirred old grievances between Greeks and Germans.
Greece's oldest consumer group, INKA, has called for a boycott of German products and stores in protest at a magazine cover of Venus de Milo making an obscene finger gesture.
The magazine showed the armless classical statue raising her middle finger under the headline Cheats in the euro family to suggest Greece deliberately misled EU peers to cheat its way into being able to adopt the euro.
Opposition politicians want Papandreou to renew demands for Germany to pay World War Two reparations, stemming from the occupation of Greece. He said the issue of reparations was not settled but he would not bring it up now.
(Reporting by Athens bureau; writing by Timothy Heritage; editing by Noah Barkin)