Greece denied a report on Tuesday it was discussing a new 60 billion euros bailout with international lenders and its borrowing costs rose amid fears it may have to restructure its debt without further EU help.

Doubts were raised by a German lawmaker whether Greece had met the conditions for getting the next, crucial tranche of aid under its existing bailout deal but a source close to EU and IMF inspectors in Athens said it was too early for a decision.

Prime Minister George Papandreou chaired a cabinet meeting ahead of the key EU/IMF decision -- at stake is the next, 12 billion euro bailout tranche due in June, essential to pay 13.7 billion euros of imminent funding needs.

Greece is fighting a difficult battle amid these fluid, difficult and unexpected conditions in the European Union, Papandreou told President Karolos Papoulias. We need a wider sense of unity and solidarity.

Dow Jones reported that Athens may clinch a deal for a new aid package as soon as June in exchange for strict measures but the report was quickly denied by Greek and EU officials.

Greece is not holding any discussion on any new aid package, a senior finance ministry official told Reuters. Such reports about discussions on new aid are not true.

Greece has said it is talking with EU partners about ways to plug a 27 billion euro funding gap next year after it conceded it was unlikely to be able to return to bond markets as planned.

Borrowing costs have hit record highs on concerns a 110 billion euro EU/IMF bailout is not enough to avert default.

On Tuesday, Greece paid almost 4.9 percent to raise 1.62 billion euros of 6-month T-bills, with local investors buying up the bulk of the auction.

The sale came after ratings agency Standard & Poor's downgraded Greece further into junk territory to B and said Athens may have to write off up to 70 percent of its debt, implying big losses for bond holders.

Government officials have ruled out an outright debt restructuring, saying Greece is looking for longer to repay its bailout loans as well as a lower interest rate. They also want the European rescue fund (EFSF) to buy Greek bonds.

After a meeting of select euro zone officials in Luxembourg on Friday, Jean-Claude Juncker, chairman of the Eurogroup of finance ministers of the 17-nation euro area, said there was a consensus that Athens would require a second rescue.

The Eurogroup will discuss Greece, burdened with a 327 billion euro debt, next Monday. The EU is currently negotiating a bailout with Portugal, the third state it is rescuing after Greece and Ireland.

DOUBTS ABOUT AID TRANCHE?

Gerda Hasselfeldt, who chairs the group of Chancellor Angela Merkel's Bavarian sister party the Christian Social Union (CSU) in the German parliament, said there were indications Greece may not meet loan conditions and not get its next aid tranche, which would be tantamount to default.

Sources close to the international inspectors said it was too early in their visit to Athens to say whether Greece had met its targets. IMF and EU officials want more clarity on fiscal and privatization plans outlined by Athens in mid-April, sources had said prior to the visit.

Conditions included the adoption of a mid-term plan by mid-April, to be voted on in parliament by mid-May, which must include details of permanent fiscal consolidation measures and their timing as well as annual spending ceilings for each ministry through 2014.

Greek officials say inspectors are finding some gaps in efforts. Fiscal goals are threatened by low revenues due to tax evasion and a deep recession, while reforms and privatizations are also at risk due to internal resistance.

Workers have called a general anti-austerity strike on Wednesday, expected to ground flights and shut down services across Greece. Opinion polls late on Monday showed the ruling socialists losing ground but still 1.7 percent ahead of the conservative opposition.

Budget figures on Tuesday showed Greece was behind targets, with net government revenues dropping 9.2 percent year-on-year in the first four months. Net tax revenues stood at 14.46 billion euros, 12 percent below an 16.33 billion euro target in the country's 2011 budget plan.

One government minister publicly urged his colleagues to step up the work on Monday.

We cannot waste a single day, Health Minister Andreas Loverdos told a news conference, adding he was not prepared to remain in a government of opaque and contradictory policies.

Portugal International Monetary Fund