WRAPUP 1-EU’s Almunia says no chance Greece default

* Almunia says no Plan B for Greece

* Almunia says Greece will not leave euro zone

* Says EC to discuss Greece recommendations next week

* Greek finmin says no knowledge of EU bailout talks

* Greek 5-yr CDS falls from record 422.5 bps

By Clara Ferreira-Marques

DAVOS, Switzerland, Jan 29 (BestGrowthStock) – A top European Union
official said on Friday there was no risk that Greece would
default or leave the euro zone and the country’s finance
minister said he was not aware of any bailout talks.

“No, Greece will not default. Please. In the euro area, the
default does not exist because with a single currency the
possibility to get funding in your own currency is much bigger,”
Monetary Affairs Commissioner Joaquin Almunia told Bloomberg TV.

“There is no bailout problems.”

Greek Finance Minister George Papaconstantinou echoed those
comments, saying he was not aware of any bailout talks with EU
states including France and Germany, and said the government was
focused on doing “whatever it takes to bring the deficit down.”

Greece has pledged to reduce its budget deficit this year to
8.7 percent of gross domestic product through welfare cuts, tax
reforms and savings on public sector wages.

The euro zone member partially regained investor confidence
on Monday when it succeeded in selling 8 billion euros of bonds
and announced plans to sell more in February.

Concerns over Greece’s ability to rein in its spending have
continued to haunt the markets, despite repeated assurances from
Greek and EU officials, but Almunia’s comments helped sooth debt
markets.

The cost of insuring Greek government debt against default
fell to 397,000 euros per 10 million of exposure from a record
high of 422,500 on Thursday, according to the five-year credit
default swap prices from CMA DataVision. [ID:nLDE60S0JR]

The premium investors demand to hold Greek government bonds
over benchmark German Bunds also fell, with traders citing media
reports saying the EU could bail out Greece. [ID:nLDE60S0EJ]

The Financial Times quoted what it said were high-level EU
officials saying that Greece, whose budget deficit hit an
estimated 12.7 percent of GDP this year, would in the last
resort receive emergency support from other euro zone
governments.

The reports came despite denials from Germany and France of
similar suggestions on Thursday and comments by the European
Commission president revived speculation of an EU rescue.

“From my point of view it is quite clear that economic
policies are not just a matter of national concern but European
concern,” Jose Manuel Barroso said in Brussels on Thursday.

Financial markets are gripped by the fear Athens will not be
able to service its heavy debt, putting pressure on the euro and
even prompting speculation that Greece could be forced out of
the currency bloc.

Asked if its problems could force Greece out of the euro
zone, Almunia said: “no chance.”

“Because it is crazy to try to solve the problems the Greek
economy has outside the euro zone,” he said.

Almunia said euro zone ministers had prepared fiscal
recommendations for Greece and other countries, to be discussed
at a regular meeting at European Commission level next week, but
denied there was any special EU plan to rescue Greece.

“It is a normal analytical document that is written every
month,” he said. “We have no plan B. Plan A is on the table. It
is fiscal adjustment.”

Almunia said he had spoken to the Greek prime minister and
finance minister at the World Economic Forum in the Swiss resort
Davos to explain that the EU recommendations would involve
adjusting the public deficit and balancing the budget.

Papaconstantinou said the European Commission meeting would
simply endorse the fiscal discipline programme Greece has
already announced and was determined to implement.

“There is one thing which I want to make absolutely clear
–the Greek government is determined to do whatever it takes to
bring the deficit down,” he said.

Stock Market Report

WRAPUP 1-EU’s Almunia says no chance Greece default