Spain, Greece and Italy faced higher borrowing costs at debt auctions Tuesday after Standard & Poor\'s downgraded Greece and said it is \"increasingly likely\" that the nation will default. Spain sold ¤5.4 billion (Dh28.4 billion) of 12 and 18 month Treasury bills, just below the maximum target of ¤5.5 billion, and its 12-month borrowing costs rose to 2.695 per cent from 2.546 per cent in May. Greece\'s borrowing costs also rose as it sold 26-week Treasury bills, mostly to domestic buyers, and Italy auctioned ¤3.5 billion of five-year bonds at 3.9 per cent, up from 3.77 per cent last month. The gap between Greek and German borrowing costs surged to the widest since the start of the single currency yesterday after S&P slashed Greece\'s rating to the lowest in the world and said it was likely to become the first euro nation to default. Euro region finance ministers hold an emergency meeting in Brussels today to hammer out a second Greek rescue ahead of a summit of leaders on June 23-24. \"Anybody who believes that there\'s going to be a positive twist at the council with respect to Greece should also bet on a relief rally in the other peripherals,\" said Ioannis Sokos, a fixed-income strategist at BNP Paribas in London. \"The current yield pickup looks more tempting than it was a couple of months ago for Spain and Italy.\" The yield on Spain\'s 10-year bonds widened to 5.5 per cent from 5.492 per cent yesterday. It was at 4.738 per cent a year ago. Italy\'s 10-year bond yields 4.778 per cent. The Greek 10-year yield also widened and the spread between it and German bunds widened to 1,444 basis points. S&P\'s downgrade of Greece to CCC from B reflects \"our view that there is a significantly higher likelihood of one or more defaults,\" the rating company said. \"Risks for the implementation of Greece\'s European Union/International Monetary Fund borrowing programme are rising, given Greece\'s increased financing needs and ongoing internal political disagreements surrounding the policy conditions required.\" While the European Central Bank has said it could accept a plan in which creditors voluntarily agree to buy Greek bonds to replace maturing debt, policy makers have warned against a German proposal that maturities on Greek debt be extended for seven years, an outcome that rating companies said would be considered a default. Greece\'s Finance Ministry said S&P\'s decision \"ignores\" the \"intense consultations\" to resolve the nation\'s crisis between officials at the European Commission, ECB and IMF. At the Greek auction of 26-week treasury bills today, the average yield was 4.96 per cent and demand was 2.58 times the amount sold. At a sale of debt of the same maturity last month, the yield was 8 basis points lower and the bid-to-cover ratio was 3.58 times. Demand for Spain\'s 12-month bills was 2.85 times the amount sold yesterday, compared with 2.5 at last month\'s auction. It also sold 18-month debt, which had a bid-to-cover ratio of 3.91 times, compared with 4.12. \"Demand was healthy, but Spain had to pay a high price to sell almost all the amount announced, a reflection of the current tensions in the peripheral universe,\" Chiara Cremonesi, a fixed-income strategist at Unicredit Bank AG, said. Spain\'s Socialist government is trying to shield the euro region\'s fourth-largest economy from the sovereign-debt crisis, even as its authority is being undermined by the approach of a general election. In Italy, Prime Minister Silvio Berlusconi is also under pressure after he suffered his second electoral repudiation in two weeks as Italians voted to overturn legislation he sponsored, weakening his grip on power and increasing the chance of early elections. From / Gulf News