Greece 'will not default on debt'

The European Union’s Economic Commissioner said today that Greece will not default on its mounting debt.

Olli Rehn told a news conference that default is “not an issue”.

The comments come as financial markets are charging higher interest rates for Greek bonds because they believe the country may be unable to repay its large debt while its economy grows slowly.

Mr Rehn also warned of future euro area deflation – or a fall in real prices - if Greece and other debt-laden countries do not curb wages and make tough reforms to boost growth.