"Nothing has been decided yet," a spokesman for German Chancellor Angela Merkel said as officials from other countries started talking about the pending deal for eurozone bailout funds to buy up the bonds of crisis-hit governments.
Merkel, who has long opposed such a deal, is under intense pressure, along with other European countries -- pressure that was increased Monday and Tuesday at a summit of the Group of 20 leading industrial and developing economies in Los Cabos, Mexico -- to take radical action to stem the growing euro crisis.
The deal outline is expected to be announced when the 27 European Union leaders meet for a summit in Brussels June 28-29 -- a summit that will be "critical" to shoring up the eurozone's single currency, U.S. Treasury Secretary Tim Geithner said Tuesday at the close of the G20 summit.
Other officials said the move -- representing a substantial shift in policy for Merkel -- will send a strong signal to financial markets that Europe's biggest economy is finally prepared to back its weaker neighbors, the British newspapers The Daily Telegraph and The Guardian reported.
"The idea is to stabilize borrowing costs, especially for countries who are complying with their reform goals, and this should be clearly separated from the idea of a bailout," Prime Minister Mario Monti of Italy said.
Under the proposed deal, the two European rescue funds -- the permanent $634 billion European Stability Mechanism and its predecessor, the $317 billion European Financial Stability Facility -- will buy bonds issued by Spain and Italy, the newspapers reported.
The bailout funds could buy bonds from other crisis-hit countries later.
The deal would mark the first time the funds are used directly to purchase sovereign debt.
The mechanism already exists for country's to request rescue funding be used to purchase their bonds, but no country has yet made that request, The New York Times reported.
"If those countries want help and if they cannot withstand the current borrowing rates, they have to say it and then the euro zone would look at it," said a eurozone official who was not authorized to speak on the matter.
The idea is to drive down the cost of Spanish and Italian bonds by showing that the eurozone is prepared to stand behind the debts of its members, officials said.
However, using rescue funds to buy bonds or to bailout banks directly would not add to that country's debt burden, which is the issue underlying the crisis in the first place.
Experts said it was a step toward establishing shared eurobonds, where debt from across the 17-country euro area is shared -- and effectively underwritten by Germany.
Eurozone finance ministers are expected to discuss the plan in Luxembourg Thursday and Friday.
Some European leaders are to meet in Rome Friday ahead of next week's summit.
The rescue-deal outline comes after 10-year Spanish bond yields increased sharply to more than 7 percent this week -- levels many analysts say is unsustainable.
Twelve- and 18-month Spanish bond auctions yielded 5.1 percent Tuesday. A similar debt sale in May saw a rate of 3 percent.
Spain has scheduled an auction of up to $2.5 billion in the 10-year bonds Thursday.