There are reports that euro zone countries have agreed on the interest rate that crisis-hit Greece would be charged if it sought emergency loans.
An EU diplomat told the AFP news agency that the rate would be lower than the current market rate for Greek debt, but would not be 'gift-wrapped', and would be higher than the rate for a country with a top AAA credit rating.
The yield - or effective interest rate - demanded by investors to buy Greek 10-year bonds yesterday soared to a record 7.5%. Although it eased back to just above 7% today, it is still around double the yield on German bonds.
Greece has been trying to resolve massive debt and public deficit problems but has faced increasing difficulties in raising fresh money on financial markets to cover its obligations.
Speculation that Greece may need help from the EU, together with the International Monetary Fund, has increased as its borrowing costs have soared to record highs.
The country suffered another blow today when credit rating agency Fitch downgraded its ratings because of the growing challenge the country faces in managing its public finances. The agency said it had lowered Greece's long-term rating to BBB- from BBB+.
A ratings downgrade such as by Fitch typically will increase a country's borrowing costs as it has to pay a higher rate of interest to offset its greater risk profile.
Greece will face a big test next Tuesday when the government issues Treasury bills to raise funds which it needs urgently to cover debt maturing in May, analysts said.
Greece needs to borrow around €11.5 billion by May to cover its debt obligations. The euro zone country's borrowing costs soared to record high levels yesterday amid growing doubts it can repay its debt despite repeated pledges of help from the EU and the IMF.
ECB chief Jean-Claude Trichet insisted that an EU-IMF rescue plan, which was approved by European leaders last month, was realistic and that 'a default is not an issue for Greece'.
Meanwhile, the high interest rates demanded by investors to buy Greek debt run counter to the true state of the economy and the government's austerity efforts, the finance minister said today.
'The rates obviously are a question that worries us,' Finance Minister George Papaconstantinou said after meeting with Prime Minister George Papandreou.
'We believe that they do not reflect the real situation of the economy or the efforts and results already obtained by the Greek government,' Papaconstantinou said.
'But with time, I believe that the markets and our European partners will take account of these results, and therefore we will have more reasonable rates,' he added.
European Union president Herman van Rompuy told newspapers today that the euro zone was ready to intervene alongside the IMF if Greece asks for help dealing with its debt crisis.
'The Greek government is courageous and is breaking with the past. We would be ready to intervene if the Greeks ask us to,' he told the Le Monde, Frankfurter Allgemeine Zeitung, El Pais and De Standaard newspapers.
