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Greek PM offers to step down ahead of new EU/IMF bailout

Greek Prime Minister George Papandreou has offered to step down in order to facilitate the formation of a national unity government, according to Greek state television.

However, he said any national unity government must seek to support a new EU/IMF bailout, and not seek to overhaul it.

Meanwhile, the cost of Greek debt hit new highs again today as talks on a new aid package for the country were in deadlock.

Demonstrators and riot police also clashed near the Greek parliament in Athens as the prime minister prepared to push through a new austerity package to keep aid coming from the EU/IMF.

The yield on 10-year government bond rose to a fresh high of 17.9pc and the cost of insuring Greek debt against default hit a new record high while the cost of Irish and Portuguese borrowing also soared.

As eurozone ministers failed to reach agreement on how private holders of Greek debt should share the costs of a new bailout, the euro also suffered.

The downbeat mood was exacerbated on news that rating agency Moody’s is reviewing the ratings of BNP Paribas, France's biggest bank, Societe Generale and

In Athens, riot police and barricades blocked approaches to parliament on Wednesday as 20,000 people mustered in the capital, summoned by a popular protest group that has occupied central Syntagma Square for weeks after similar disruptions in Spain.

The Greek general strike, the third this year against austerity, disrupted public transport on land and sea and forced offices to close.

Many Greeks are angry that additional sacrifices are demanded after billions of euro in spending cuts and tax hikes last year.

Greece is due to receive a €12bn injection from the European Union, European Central Bank (ECB) and International Monetary Fund (IMF) at the end of June as part of the €110bn bail-out agreed last May.

But the plan assumed Greece would be able to return to the markets by 2012, an event many now believe impossible.

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As a result the EU is working on a second package which is expected to total €120bn to ensure the country is funded through to 2014.

The package would not help reduce Greece's massive €340bn debt load, just give it more time to push through economic reforms.

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