Greece said it was discussing with its euro zone partners ways to plug a 27 billion euro ($39 billion) funding hole next year as a fresh credit rating cut on Monday made its return to markets even more difficult.

Debt-ridden Greece wants its international lenders to ease the terms of a 110 billion euro bailout and get fresh funding to avoid default, Greek officials said, as European Union and International Monetary Fund inspectors found delays in reforms and fiscal efforts.

The initial plan was for Greece to return to markets (to raise 27 billion euros) in 2012. At this moment this appears difficult, Labor Minister Louka Katseli told Reuters. Discussions are taking place at European level to explore alternative responses.

Government officials, who have ruled out an outright Greek debt restructuring, said they hoped its EU/IMF lenders would agree to a new extension of maturities of the bailout loans as well as a lower interest rate. They also want the European rescue fund (EFSF) to buy Greek bonds.

It would give Greece the comfort and ease to proceed with the structural reforms it needs without squeezing people dry, said a senior government official.

A technical team of IMF and EU inspectors is preparing the ground for a visit by senior officials this week. At stake is a 12 billion euro bailout tranche due in June to help pay 13.7 billion euros of funding needs.

So far, some weaknesses have been observed, some deviations from the program, Greek central bank governor George Provopoulos said during a meeting with President Karolos Papoulias.

Euro zone finance ministers will discuss on May 16 whether Greece needs a further economic plan. The EU is currently negotiating a bailout with Portugal, the third state it is rescuing after Greece and Ireland.

Ministers from the euro zone's biggest economies who met in Luxembourg to discuss Greece's debt crisis on Friday ruled out the prospect of Greece leaving the 17-member euro zone and said restructuring its 327 billion euro debt would offer no permanent solution to its problems.


But Standard & Poor's cited increased risks of debt restructuring for downgrading Greece by two notches to B on Monday and placed it on credit watch negative, and Moody's said it too may cut its Greek rating further, possibly by more than one notch.

The euro fell against the dollar, hitting its lowest level in three weeks, European stocks extended losses and spreads between 10-year Greek bonds and German bunds widened after the rating cut.

The bailout, granted a year ago to help Greece avoid default and stop the crisis spreading to other economies, has so far failed to appease nervous markets.

Given that this is a systemic euro zone problem, its solution will affect all member countries, Katseli said.

Lower than expected revenues due to persistent tax evasion and a deep recession are risking fiscal targets while some reforms have met resistance from within.

As an austerity-plagued public loses patience, even some Greek politicians have suggested a soft restructuring which might involve lengthening maturities on the country's bonds.

On Monday, Health Minister Andreas Loverdos urged cabinet members to step up efforts, saying he was not prepared to remain in a government of opaque and contradictory policies.

I am at the Prime Minister's disposal, he said, prompting questions about a possible cabinet reshuffle at the government spokesman's daily briefing. He ruled it out.