GREEK government and international officials have signalled they will yield to the demands of banks and hedge funds to secure a bond deal before the end of the week.
Amid fresh warnings of Greek default, Charles Dallara, director of the Institute of International Finance, flew from Washington to Athens on Tuesday to try to achieve a deal before the European finance ministers' summit on Monday.
Sources close to the bondholders said there was "enough movement" from officials representing Greece, the International Monetary Fund, European Central Bank and the European Union to persuade Mr Dallara to meet them. Bondholders are resisting pressure to take losses of more than 50 per cent on their bonds.
The IIF, which has been representing private sector bondholders, said it was committed to "seeking an agreement on a voluntary debt exchange for Greece" and appealed to officials to "work in good faith towards this end with a sense of urgency". Greece must reach a deal with bondholders to secure the ?130 billion ($A159.4 billion) bailout it needs before Athens runs out of money in March.
But the country was likely to default anyway, a director of Fitch warned. Edward Parker, head of the credit rating agency's sovereign group, said: "It is going to happen. Greece is insolvent, so it will default."
Referring to private sector involvement, he said: "We don't think this PSI is the way to go. It clearly is a default however they try to spin it."
Mr Parker said a disorderly default, triggered by a failure to agree to a deal with bondholders, would be "really damaging". "In a rational situation, you would think Greek politicians and European policymakers would ensure that it doesn't."
Ewald Nowotny, a member of the ECB's governing council, said he hoped "all participants will understand the responsibility they have".
Tension has been exacerbated by the fragile state of Europe's bailout mechanisms. Leaders leapt to the defence of the European Financial Stability Facility, the bailout fund with the task of supporting indebted states, which was stripped of its AAA rating by Standard & Poor's on Monday. Japan's Finance Minister, Jun Azumi, urged Germany and France to push for a better financial "firewall" to prevent contagion. Berlin and Paris said there was no need to boost the EFSF despite the downgrade.
Two European central bank chiefs have urged investors to pay less attention to credit rating agencies and to consider other factors in assessing what the region's debt is worth.
European Central Bank president Mario Draghi and Bank of England governor Mervyn King have separately questioned the role of rating agencies after Standard & Poor's on Friday cut its ratings on nine European countries, including France and Italy.
Sir Mervyn said people should "put less focus on what the ratings agencies say and more on what the market is saying in terms of sovereign debt".
Mr Draghi told the European Parliament in Strasbourg that "we should learn to do without ratings, or at least we should learn to assess creditworthiness".