Germany is insisting that bondholders should have to share the cost of a second Greek rescue, defying the views of ECB president Jean-Claude Trichet who is opposed to a policy he believes would damage financial confidence inside the eurozone.

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[Mr Schaeuble] wants bondholders to extend the repayment date on Greek debt by seven years. [He] is pressing ahead with his policy despite ratings agencies saying it's likely to be classes as a default by Greece.

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Mr Trichet said he would back a plan that sees bond investors voluntarily agree to buy new Greek bonds when the ones they already hold mature, but nothing more drastic.