ATHENS, Greece – Greece’s borrowing costs shot up yesterday following a report, later denied, that Athens was seeking to revise a deal hammered out last month which would provide a European and International Monetary Fund rescue to prevent a default.

Markets have so far appeared unconvinced that the bailout plan, which would provide Greece with bilateral loans from eurozone countries and the IMF, would be sufficient to contain the country’s debt crisis.

Finance Minister George Papaconstantinou vehemently denied a report that Athens was seeking to renegotiate the rescue plan to avoid IMF participation.

“There was never any action by our country to change the terms of the recent agreement,” Papaconstantinou said in a written statement late yesterday afternoon.

“The agreement is important for both Europe and Greece, because it determines the conditions under which a country will be supported under specific terms by its partners,” he said. “But as we have repeatedly said, Greece has not asked for this mechanism to be activated.”

Greek borrowing costs shot up in the wake of the report, sending the interest rate gap, or spread, between Greek 10-year bonds and equivalent German issues surging to 406 basis points, or 4.06 percentage points, Tuesday afternoon from about 3.40 points in the morning.

Shortly before Papaconstantinou’s comments were issued, the spreads had narrowed to 3.845 basis points after Finance Ministry and government officials denied the report, but on condition of anonymity in line with ministry policy. They contracted further to 3.76 points later in the evening after the minister’s statement.

Athens has repeatedly said it hopes never to have to use the rescue plan, hammered out in Brussels on March 25, but that its existance would restore market confidence and reduce the cost of borrowing on international markets.

However, markets have remained jittery.

“Today’s 60 basis points surge in Greek government bond yields underlines yet again the continued precariousness of the troubled economy’s position,” said Jonathan Loynes, chief European economist at Capital Economics.

Loynes said that although the spike in bond yields appeared to have been triggered by the reports that were later denied, “yields had been creeping higher again over the last week anyway, suggesting that markets were far from convinced that the package spelt an end to Greece’s troubles.”

On Wednesday, inspectors from the IMF are due in Athens to review progress in government austerity cuts. Greece has promised draconian fiscal reforms to reduce debt but remains under pressure from high borrowing costs.

The two delegations from the IMF are expected to stay for about two weeks and will meet this week with Papaconstantinou, Finance Ministry officials said. They will also review an overhaul of Greece’s tax system.

It is the first inspection since the bailout agreement on financial assistance.

A lack of detail on the bailout plan, looming debt repayment deadlines, and modest demand for five billion euro worth of seven-year bonds sold on March 29 have maintained market uncertainty.

Shares on the Athens Stock Exchange also suffered, with the general index closing down 2.21 per cent at 2,048.69.

Greece must borrow 54 billion euro (US$72 billion) this year, but has so far raised less than half of that amount on the international markets. It needs to roll over some 20 billion euro (US$27 billion) in debt in April and May.

The IMF is helping oversee tough inspections of Greek public finances, along with the European Commission and European Central Bank. The next assessment of Greece’s progress is due in mid-May.