Fears that a planned rescue of Greece could stall and extend the financial crisis to other euro zone countries hit European markets on Wednesday as investors worried that Athens may default on its debt.

A day after rating agency Standard and Poor's slashed Greek debt to junk status, the premium investors demand to hold Greek government bonds jumped to its highest in 14 years.

S&P also downgraded Portugal, raising concerns the crisis may spread to other indebted states on the eurozone fringes. European shares hit a five-week low in early trade, after recording their biggest one-day fall in five months on Tuesday.

The chances of a default by the Greek government are increasing not by the day but by the hour. If the IMF and European governments don't come up with something quickly, then I see the market going down further quite rapidly, said Koen De Leus, economist at KBC Securities.

European Central Bank Executive Board member Juergen Stark said governments must ensure the financial market troubles do not develop into a full blown sovereign debt crisis.

The current trend in fiscal policies is simply not sustainable. ... The onus is now on governments to ensure that the crisis that initially affected the financial sector, and subsequently the real economy, does not lead to a full-blown sovereign debt crisis, Stark said.

Averting it will require very ambitious and credible fiscal consolidation efforts. In fact, substantially stronger consolidation efforts than those conceived so far.

European Union President Herman Van Rompuy said he would convene a summit of euro zone countries around May 10 and insisted there would be no restructuring of Greek debt.

Negotiations are going on, they are well on track, and no question about restructuring of the debt, he told a news conference in Tokyo.

Bailout talks between Greece, European authorities and the International Monetary Fund began in Athens last week, after Greece asked for as much as 45 billion euros in emergency loans from euro zone governments and the IMF this year.

Greek and European Commission officials have said the first tranche of aid will be paid before May 19, when Athens will need to refinance a maturing 8.5 billion euro bond.

But markets are not convinced that governments will have the political will to reach and sustain an agreement on the aid, especially in Germany, where public opinion is strongly against helping Greece and where Chancellor Angela Merkel's party risks defeat in a regional election on May 9.

IMF/ECB TALKS IN GERMANY

ECB President Jean-Claude Trichet and IMF chief Dominique Strauss-Kahn will brief German political leaders later on Wednesday on the latest plans to help Greece.

Members of Merkel's Christian Democrats (CDU) said on Tuesday they would raise the subject of forcing investors to take a discount on Greek debt.

Greece's securities regulator on Wednesday banned short-selling in shares on the Athens bourse until June 28 after investors responding to the deepening debt crisis ditched Greek assets a day earlier. Greek shares fell 6 percent on Tuesday, with banks plunging 9 percent.

As market pressure on Greece has intensified, signs have grown it would need much more than the 45 billion euros already committed in aid.

The Financial Times reported the IMF is considering raising its contribution by 10 billion euros to 25 billion euros.

S&P cut its rating of Greek government debt by a full three notches to BB-plus, the first level of speculative status. The outlook is negative, meaning the agency could downgrade Greece again.

The downgrade put Greece on par with Romania and below Kazakhstan, Hungary and Iceland, the last of which rocked global markets when its main banks imploded at the start of the global financial crisis.

In Athens on Tuesday, about 1,500 private and public sector workers, students and anarchists marched to parliament chanting Out with the IMF and the European Union in protest against austerity measures that could accompany the bailout.

Most Greeks disapprove of their government's decision to ask for financial aid, according to the first opinion poll since the request was made. Of 1,400 people surveyed, 60.9 percent said they were against the decision, said the poll, released on Tuesday by Greek Public Opinion for Mega TV.

(writing by Dominic Evans; editing by Janet McBride)

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