Greek bond rates soar

Concerns that the latest bailout for Greece could unravel pushed interest rates on Greek 10-year bonds to record highs Thursday.

The 10-year bond yield climbedabove 18 per cent. The Greek government's cost of borrowing money for 10 years is now 16 percentage points higher than Germany's.

Markets are concerned that demands from Finland, a Greek creditor, for collateral in return for rescue loans could undermine the latest rescue package.

Greece has been relying since last year on funds from a 110 billion ($156 billion Cdn.) package of bailout loans from other European Union countries and the International Monetary Fund.

On July 21, European leaders agreed on a second bailout, worth an additional 109 billion.

Finland strikes side deal with Greece

In Finland earlier this year, a nationalist, anti-bailout party won a large share of the votes in national elections. Since then, the Finnish government has struck a deal with Greece to secure cash guarantees for its share of the contributions to the bailout fund.

The other eurozone countries must still approve that arrangement. But if it goes through, four other contributors the Netherlands, Austria, Slovenia and Slovakia have said they will seek the same terms.

That has thrown into question whether the second bailout will unravel.

Other eurozone nations, including powerful Germany, oppose the deal because the collateral would come from the new bailout loans.

Finland has said it will not back down, although Prime Minister Jyrki Katainen said his government was open to amending details of the agreement.

The Greek government has been struggling to meet the targets laid out in the bailout agreements, imposing new austerity measures such as increased taxes and cuts to public sector pay and other spending.

Separately, Deputy Development Minister Haris Pamboukis resigned Thursday, following a dispute in a cabinet meeting over implementing spending cuts, adding to the perception that the government is divided as it struggles to deal with its debt crisis.