Eurozone ministers failed on Tuesday to reach an agreement on how private holders of Greek debt should share the costs of a new bailout, putting the onus on the leaders of Germany and France to forge a deal later in the week.
Media reports, however, quoting EU diplomats suggested that they are preparing for a bailout package ranging between €90 billion and €120 billion, a year after it received a €110 billion bailout.
Nervous markets pushed the bond yields of Greece, Ireland and Portugal to their highest levels since the introduction of the euro in 1999 amid uncertainty.
Germany, backed by the Netherlands, wants banks, pension funds and insurance firms that hold Greek debt to swap their bonds for new ones with maturities that are seven years longer.
This would buy Greece more time to chip away at its massive €330 billion ($477 billion) debt mountain and limit the amount of taxpayer-funded aid it would receive. But ratings agencies have warned they would label the move as a default.
Fearful that Berlin's plan could unleash a new wave of contagion, the European Central Bank, European Commission and France are pushing for a softer solution in which bond owners would be encouraged, probably by incentives, to buy new Greek debt as their holdings matured.
“There has been no result,” said Wolfgang Schaeuble, finance minister, Germany.