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 EUR40 billion 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.