ATHENS, Feb 27 (Reuters) - Germany and France have agreed to help Greece sell bonds in return for stronger efforts by Athens to slash its budget deficit, Greek newspaper Ta Nea reported on Saturday, citing unnamed sources.
The Greek finance ministry declined to comment on the report, which came after growing signs that diplomatic efforts were underway to resolve Greece's debt crisis.
Germany's state-owned development bank KfW will buy Greek government bonds or provide guarantees for other banks to buy them, said Ta Nea, a major newspaper, quoting unnamed banking sources and officials close to Germany's finance minister.
France's state-owned bank Caisse des Depots will also be involved in the aid, Ta Nea reported, adding that French President Nicolas Sarkozy had discussed this by telephone with Greek Prime Mminister George Papandreou.
In return, the Greek government has agreed to introduce additional austerity measures worth some 4 billion euros ($5.4 billion) to reach its target of cutting the budget deficit by 4 percentage points this year, the newspaper said.
Sources in Germany's ruling coalition told Reuters earlier this month that the coalition was considering having KfW buy Greek bonds as a way to resolve Greece's debt crisis, which has caused turmoil in European debt markets and undermined confidence in the euro currency.
European Union inspectors visited Athens this week to discuss the crisis. EU Economic Affairs Commissioner Olli Rehn plans to visit Athens next week, and Ta Nea said Rehn would announce the aid plan for Greece during his visit.
Papandreou said on Friday that he would visit Berlin for
talks with German Chancellor Angela Merkel on March 5, while
Deutsche Bank
Media reports in Germany and France have suggested governments in the 16-country euro zone might offer aid worth 20 to 25 billion euros to Greece, but officials have declined to comment on the size of any aid plan.
Greece, which is preparing to tap the euro debt market with its second bond issue this year, has said its funding needs are met until mid-March, and it will need to refinance about 20 billion euros of debt maturing in April and May. The debt market has been worrying that Greece may not be able to borrow at affordable rates. (1 euro = $1.36) (Reporting by Lefteris Papdimas; Editing by Andrew Torchia)