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 (Reuters) - 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.
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