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Concern over Greek debt payments

Investors increasingly expect that Greece will not pull itself out of its financial hole and will have to renege on some debt payments, despite spending a year on bailout loans making painful austerity reforms.

The concern that bailouts and austerity, once Europe's hailed recipe for the crisis, are insufficient and that debt jitters are particularly difficult to control once unleashed has resonated globally.

Even the US, whose debt investors have huge faith in, has been warned by a ratings agency about its heavy borrowings.

Despite repeated insistence from Greek and EU officials that there are no thoughts of restructuring Greece's debt, markets are predicting that will happen eventually, that the €110bn international plan to save the country's finances is failing despite sweeping government reforms.

"It's not the fault of the markets," said economic analyst Vangelis Agapitos.

"It's the fact that 18 months since the very beginning of this crisis, we still have vague plans as to how we're going to counter the beast, which is a huge government, a difficult to tame deficit and a very large debt."

The government imposed broad and painful reforms to overhaul the economy. It has cut public sector salaries and pensions, hiked sales and income taxes and tried to crack down on widespread tax evasion and open up protected professions to more competition.

But while the measures have helped keep the deficit from growing too quickly, they have also hindered growth, keeping the country in recession.

Shops and boutiques in popular shopping districts have closed down at an alarming rate, their shuttered windows plastered with "for rent" signs as Greeks curb their spending.

While unemployment spirals to 15.1pc, the streets of Athens have been hit by repeated demonstrations, and all sectors - from lawyers to port workers, doctors to taxi drivers - have staged frequent strikes. The country faces yet another general strike on May 11.

PA Media