Ethnic Catalan protesters (top), also known as ‘Indignados’, shout slogans during a protest against austerity measures in Boqueria market on Las Ramblas in Barcelona. Photo: Reuters

GREECE is seeking a two-year extension of its latest austerity programme, adding to concerns that the euro crisis is about to enter a new and dangerous phase. Meanwhile, Spain's government is said to be considering a request for a sovereign bailout.

Greek Prime Minister Antonis Samaras is expected to informally outline the proposal during talks next week with German Chancellor Angela Merkel and French President Francois Hollande.

A two-year extension to the present two-year plan was a key plank of Mr Samaras's election campaign.

The likely request by Mr Samaras, a centre-right leader elected in June, comes as his government struggles to make spending cuts of €11.5bn -- about 5pc of gross domestic product.

The cuts are a condition of the current bailout deal with the European Union and International Monetary Fund.

No formal request will be made but the proposal will be broached as part of exploratory talks, an official said, adding: "The matter of extension is already being debated in Greece and abroad. Its official submission is a different matter."

Berlin

Having recovered from eye surgery that has prevented him travelling since June, Mr Samaras will fly to Berlin and Paris next week for his first meetings. Earlier in the week, he will meet eurozone chief Jean-Claude Juncker.

Greece has failed to produce details of the proposed cuts, although the bulk of them will come from state salaries and pensions and up to 40,000 public sector job cuts. The coalition's two leftist junior partners have opposed any further cuts.

The reports about a Greek request to set aside the conditions of the existing bailout agreement came as European Economic and Monetary Affairs Commissioner Olli Rehn said Spain's government was considering a request for a sovereign bailout.

"The Spanish government has an open mind on this issue, but no decision has been made," Mr Rehn said, adding: "We stand ready to act if there is a request."

Mr Rehn's remarks came after Spanish Prime Minister Mariano Rajoy said he would ask the European Central Bank to buy Spanish bonds "if it seems reasonable". He was talking in Palma de Mallorca after meeting King Juan Carlos.

Risky

The Spanish government was also reported to be in talks with Brussels yesterday to allow tens of thousands of bank clients who bought risky savings products from now nationalised lenders to avoid losing their investments as part of that country's bank bailout.

Having spoken to people familiar with the talks, the 'Financial Times' said that instead of inflicting large losses on small savers who bought savings products linked to preference shares in the lenders known as cajas, the Spanish government was negotiating a compromise whereby they would suffer an instant haircut and then be repaid in full over time by their banks.

The decision to inflict losses on holders of high-interest preference shares and subordinated debt in rescued savings banks has been highly controversial in Spain, with the terms of the country's bank rescue not distinguishing between professional and retail investors. (Additional reporting, Reuters and Bloomberg)

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