ATHENS (Reuters) – Greece has passed its first borrowing test since euro zone leaders agreed on a potential aid package, but the high price it paid yesterday for short term cash failed to quash doubts that it can beat its crisis alone.

The debt-laden Mediterranean state drew heavy demand at auctions in which it sold 1.56 billion euros of six-month and one-year treasury bills, filling a short-term financing gap and buying time to consider whether to grab the estimated 45 billion euro ($61 billion) EU/IMF aid deal.

But the hurdle of a ten-year, 8.5 billion euro bond that it must raise money to repay in May still looms, and analysts said the country of 11 million faced a long-term slog to win back investor confidence and return to economic health.

Markets, too, were unconvinced, with yields of Greece's ten-year benchmark bonds erasing gains from a rally following the aid agreement to rise within a percentage point of euro-era highs hit last week when some investors feared possible default.

"Today's successful Greek short-term debt auctions will further ease fears about Greece meeting its near-term financing needs, but it still faces an uphill struggle to return the public finances to a sustainable position," said Ben May, an analyst at Capital Economics.

Analysts noted that the interest rates were more than double previous tenders and signalled persisting investor doubt that could eventually drive Athens to grab the aid lifeline.

The government is trying to cut last year's public sector deficit by around a third to 8.7 percent of gross domestic product this year, but the spike in its debt costs has raised spending and its budget measures are expected to deepen an economic contraction of two percent, making that goal difficult.

It has not yet asked to tap the aid, which includes an extra 10-15 billion euros from the International Monetary Fund, and Finance Minister George Papaconstantinou said Athens would stay with its plan of tapping external markets.

"We are sticking to our target and I believe we will continue to borrow from markets smoothly, as we did today with the T-bills," Papaconstantinou told parliament.

"The Greek government has not asked for the mechanism to be activated, although it remains available if needed."

The EU's executive prepared for a debate today on cleaning up budget rules to end an era when Greece and its euro zone periphery peers Spain, Portugal and Ireland have dug themselves into pitfalls by fiscal profligacy and overborrowing.

The aid deal was agreed despite resistance from Germany, where Prime Minister Angela Merkel has stressed Greece should not be given clemency after years of budgetary sins.

Some analysts suspect the announcement of the deal's details on Sunday was to buy time ahead of a May 9 German election to avoid giving voters opposed to helping Athens a reason to punish Merkel and rob her government of its parliamentary majority.

Still, euro zone officials gave a thumbs-up to the rescue package and backed Greece's stance of first shunning the aid.

"Greece is now in a stronger position because we have built up a back-stop position," European Central Bank Governing Board member Ewald Nowotny told reporters.

"The aid programme is not a gift, it is a loan. It is helping Greece to help itself."

The announcement of the deal on Sunday has raised fears among some Greeks and labour unions that it could lead to further austerity steps on top of the public wage cuts, pension freeze and tax hikes the government has already taken.

Prime Minister George Papandreou's government said the net gave Greece breathing space to focus on fiscal consolidation rather than fending off punishment from sceptical markets.

"We can turn our attention with greater calm to domestic challenges and promote the necessary changes," he said.

Following a brief rally after the T-bill auctions, the euro fell to a session low versus the dollar of $1.3568, from a near one-month high of $1.3691 on Monday.

The premium investors demand to buy Greek ten-year state bonds rather than their German benchmark counterparts rose around a fifth of a percentage point to 375 basis points. Last week it hit a euro era high of 463. Greek banking stocks lost more than four percent, with analysts saying players were booking profits after a two day rally.