Greek bonds rated 'junk' by Standard & Poor's

Global stock markets tumbled after Greece's debt was downgraded to "junk" by rating agency Standard & Poor's over concerns that the country may default.

It makes the struggling nation the first eurozone member to have its debt downgraded to junk level.

Portugal's debt was also lowered on fears of "contagion", adding to the markets' rout and a fall in the euro.

Germany immediately said it would not "let Greece fall", and there were signs that an aid package could be increased.

Greece wants 40bn euros (£34bn) from eurozone governments and the International Monetary Fund (IMF) to shore up its finances.

But there are fears it will not meet conditions needed to access the funds it needs to make looming debt repayments.

Doubts intensify

When ratings agencies downgrade the country's credit rating - it means they think it is now a riskier place to invest. If it reaches junk status, a country loses its investment grade status. Some financial institutions have rules prohibiting them from investing in "junk" bonds.

Greece's 2-year government bond yield surged to almost 15% on Tuesday, making it highly expensive for the country to borrow from the debt market.

Greek 5-year yields hit 10.6%, higher than many emerging market economies, including Ecuador at 10.5% and Ukraine at 7.1%.

The 2-year Portuguese bond yield jumped to 5.23% from 4.16%.

S&P said it was lowering its rating on Greece's debt to BB+ from BBB-. It also reducing Portugal's debt rating by two notches to A- as doubts intensified about countries with substantial debt relative to GDP.