* "Hawkish hike" from U.S. pushed yields higher in U.S. and Europe
* U.S. begins process of reducing balance sheet despite poor data
* Greece aid on the line as Eurogroup meets on Thursday
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Abhinav Ramnarayan
LONDON, June 15 (Reuters) - U.S. Federal Reserve policymakers gave markets a reality check by pushing ahead with a tightening of monetary policy despite some weak economic data, pulling government bond yields off their recent lows on Thursday.
Having hit multi-week lows on Wednesday, euro zone government bond yields edged higher across the board, tracking a move in U.S. Treasuries overnight after the Fed raised rates by 25 basis points and signalled it would begin selling assets accumulated over years of money printing.
"They have taken a cautious approach to balance sheet normalisation, but they have begun it and it's definitely a tightening of policy," said ING strategist Martin van Vliet.
"The meeting was definitely tilted towards the hawkish side."
Any action by the U.S. central bank tends to reverberate across the debt markets of developed countries, as many investors have European, U.S. and Japanese government bonds in their portfolio and switch between them when there are changes in yields.
Germany's 10-year government bond yield, the benchmark for the region, rose 1 basis point to 0.24 percent, off a seven-week low hit on Wednesday at 0.225 percent.
The yield on 10-year U.S. Treasury yields rose as much as 4 basis points from a seven-month low of 2.10 percent hit after weaker-than-expected U.S. data on Wednesday.
Lower-rated Southern European government bonds - which tend to be most sensitive to any changes or tweaks on monetary policy - were up 2-3 basis points in early trade.
"The periphery had rallied the most on Wednesday, led by Portugal, so maybe investors are thinking hold on, we may have gone a bit too far," said Van Vliet.
Portugal's 10-year borrowing costs dropped 14.5 bps on Wednesday, their steepest one-day fall in nearly a month.
Greek government bond yields remained steady on Thursday ahead of a key Eurogroup meeting later.
Euro zone finance ministers will meet later in the day to discuss whether or not to approve the disbursement of aid to Greece, money that the country needs to avoid defaulting on upcoming debt obligations.
Most analysts expect the aid to be approved, but said an agreement on debt relief is unlikely to be reached today.
"So far each episode in the Greek drama has always ended up with a last-minute temporising solution and this time euro area finance ministers are likely to approve the disbursement of the next tranche of aid and to postpone discussions about debt relief until after the summer," BBVA strategists said in a note.
An agreement on debt relief is a pre-requisite for the International Monetary Fund to participate in a deal for Greece, which in turn would pave the way for the European Central Bank to involve Greek government debt in its asset purchase scheme.
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Reporting by Abhinav Ramnarayan; Editing by Hugh Lawson