"There is agreement on the interest rate which will be applied for Greece, should it call for an aid plan," one diplomat said, on condition of anonymity, after talks between Finance Ministry officials from the 16 euro zone countries.

A previous deal agreed by European Union leaders late last month did not specify the terms under which last-resort EU assistance, backed by the International Monetary Fund, would be made available.

"It is lower than the current market rate for Greek debt," another diplomat said, referring to rates that soared past 7.5 percent on Thursday, before falling back on Friday as speculation grew that Greece would secure a rescue accord.

"But it's not gift-wrapped either - it's (still) higher than that for a country with an AAA rating from international credit rating agencies," the diplomat said.

"That will allow Greece ... if this mechanism is put in place, to re-finance itself at cheaper levels than on today's market," the diplomat added.

The diplomat said the aid would follow a "structure very similar to that applied by the IMF," the international lender of last resort.

Germany, Europe's economic powerhouse, has favored involvement of the IMF while other EU states such as France have been more reluctant for it to play a role in what they would prefer to be a solely European aid effort.

The yield - the interest rate paid - on the Greek benchmark 10-year government bond soared to a record 7.5 percent on Thursday but eased back to just over seven percent late Friday on speculation a rescue deal was in the offing.

Greece has to find around 11.5 billion euros by next month to cover its obligations and another 32 billion euros over the balance of the year.

Meanwhile, against the largely positive news flow for Greece, Fitch Ratings downgraded the country's debt ratings, saying Athens faced a challenge to raise any fresh funding.

Fitch, one of the world's big three ratings agency, lowered its rating by two notches BBB- and said that the outlook on the country remains negative.

The downgrade means that Greek debt remains investment grade - but only just. Another downgrade would make Greece's debt junk status - an ignominious position for a country using the euro currency.

Fitch said its latest downgrade reflects "the intensification of fiscal challenges" following more adverse prospects for economic growth and increased interest costs - on Thursday the country's borrowing costs spiked sharply higher as panicky bond investors fretted about the possibility that Greece could default on its debts.

Fitch said the downgrade reflected "ongoing uncertainties about the government's financing strategy in the context of increased capital market volatility." The ratings agency thinks it's now increasingly difficult for the Greek government - despite its commitment to reduce borrowings - to achieve its target of reducing its budget deficit to 8.7 percent of the country's national income and ensuring that public debt peaks at just over 120 percent of gross domestic product in 2010 and 2011.

"Pressures on the banking system underline the adverse spill-over from sovereign risk concerns on the wider economy, while contingent liabilities from the banking sector will increase as the government provides banks with increased guaranteed funding," Fitch said.

Fitch took a swipe at Greece's partners in the euro zone for failing to provide enough clarity about a promised loan facility, in conjunction with the International Monetary Fund.

"The agency reiterates the lack of clarity regarding the mechanism for timely external financial support may have hindered Greece's access to market finance at affordable cost and hence further undermined confidence in the capacity of the government to meet its fiscal targets," Fitch said.

It added: "While Fitch judges that external financial support is likely to be forthcoming, greater clarity on back-stop financial support in the form of an explicit IMF program is likely to be required to shore up market confidence in the face of still substantial near-term financing needs."