The cost of borrowing for Greece on international markets has hit the highest level ever recorded in the eurozone after its credit rating was downgraded yesterday.
Panic hit the stock markets after the country's debt was downgraded to "junk" status by Standard and Poors.
Almost £39bn (€44bn )was wiped off the value of the FTSE 100 Index yesterday amid fears over debt-laden Greece and Portugal, while New York’s Dow Jones industrial average fell 1.9% and Japan’s Nikkei 225 was down 2.5%.
Yields on 10-year Greek bonds soared to just over 10% this morning.
The EU President Herman von Rompuy said a summit of Eurozone leaders on the crisis is being planned for early next month.
British Chancellor Alistair Darling called today for Eurozone countries to “urgently” agree a bail-out for Greece or risk a further decline in stock market confidence.
Mr Darling said it was “absolutely essential” that Greece’s problems were sorted out “quickly, effectively and decisively”, following a torrid 24 hours for world markets.
Meanwhile the worsening financial crisis surrounding Greece overshadowed a planned meeting today between German Chancellor Angela Merkel and the heads of the International Monetary Fund, European Central Bank and other financial institutions.
Worried markets are looking to Ms Merkel; Dominique Strauss-Kahn, the head of the IMF; ECB President Jean-Claude Trichet and others to send a positive signal a day after Greek bonds were downgraded to junk status and Portuguese bonds downgraded two notches.
Debate over helping bailout Greece has heated up in Berlin, which is demanding that any aid to Athens be linked to strict conditions.
Finance Minister Wolfgang Schaeuble stressed that despite the rhetoric and reluctance of the past few days, Germany remained committed to helping Greece.
“It is about making the aid package that we drew up on April 11 in the eurogroup more concrete and putting it into action, to send a clear signal that we will not let Greece fail,” he said.
The debate is underscored by polls showing that many Germans feel any aid to Greece is unwarranted and an unwise decision.
A poll by Dimap, done on behalf of German newspaper Die Welt and French broadcaster France 24, showed that 57% of Germans thought that providing such aid was a bad decision while just 33% favoured such a move.
The poll was conducted earlier this month and surveyed 1,009 people. No margin of error was given.
Greece has asked for €45bn from the 16 nations that use the currency as well as the International Monetary Fund, and Germany, as Europe’s largest economy, is poised to be the biggest single contributor with €8.4bn in loans.