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The draft plan of austerity measures for 2013, presented by the Greek government on Monday and consisting of 10.5 billion euros in spending cuts and 3 billion euros in tax increases, has not been fully accepted by the Troika inspectors. After holding talks with Finance Minister Yannis Stournaras the EU, ECB and IMF representatives still had reservations about 2 billion euros of the proposed measures.

The budget for 2013 projects a deficit of 6.6% GDP for 2012 and 4.2% for 2013. Greece is supposed to attain a primary surplus before debt servicing of 1.1% GDP in 2013. Still, it is expected that the economy will contract by 6.5% this year and by 3.8% in 2013. Unemployment should rise slightly from 24.4% in 2012 to 24.7% in 2013.

The EU, ECB and IMF inspectors will meet with Greek PM Antonis Samaras at 16:00 GMT to discuss the situation further.

Rehn: EU satisfied with progress in Spanish bank recap

European Commissioner for Economic and Monetary Affairs Olli Rehn met with Spanish President Mariano Rajoy and Spanish economy minister Luis de Guindos in Madrid on Monday in order to discuss the country's economic situation in the light of the new budget cuts announced last Friday by the Spanish government.

Olli Rehn praised Spain's consistency in introducing budget cuts in order to lower the budget deficit and said that he can already see an improvement, but that the program of ambitious reforms must be continued in order to obtain lasting effects. He expressed his satisfaction with the results of Spanish bank stress tests, which revealed that the country will need less capital to rescue its banking sector than the initially calculated 100 billion euros.

The European Commissioner for Economic and Monetary Affairs also assured that the EU is prepared to act in case Spain decides to submit a request for a bailout.

Spanish 10-year bond yields declined further to 5.89% on the news.