Greek borrowing costs rose yesterday, after narrowing sharply the previous day, on investor doubts about the effectiveness of a huge EU-IMF bailout package.

The interest rate that Greece would have to pay to raise new money on financial markets through 10-year sovereign bonds widened to 7.850 per cent from 6.717 per cent on Monday.

The yield on 10-year Portuguese bonds meanwhile narrowed slightly to 4.635 per cent from 4.697. The rate on 10-year Spanish paper was stable at 3.924 per cent against 3.915 per cent.

Those fears subsided on Monday as markets around the world welcomed news of a €750 billion EU-IMF rescue mechanism for troubled eurozone economies. But caution set in yesterday, reflecting investors' fears that the package would not be able to resolve deep-seated debt problems in the zone.

Greece however is for the moment sheltered from the bond market and is about to draw funds from an earlier European Union-International Monetary Fund arrangement worth €110 billion.

Greece yesterday prepared to ask the EU and IMF for a first loan of €20 billion to avoid bankruptcy after the government unveiled radical pension reforms that have alarmed unions.

The money would be the first tranche of the emergency rescue package agreed with the EU and IMF in return for drastic budget cuts.

The tranche of €14.5 billion from the EU and €5.5 billion from the IMF "should be available, possibly within the day," a finance ministry source told AFP on condition of anonymity.

The ministry will send a letter to the European Commission, the European Central Bank and the International Monetary Fund formally requesting the activation of the bailout, the source added.

Greece needs €9 billion by May 19 to meet debt repayments and it needs tens of billions more over the next few months as its access to debt markets has effectively been blocked by high rates demanded by investors.