New bailout deal 'attainable', says Greek minister

A European debt deal is "attainable" at an emergency EU summit this week, Greece's finance minister has said, signalling progress in talks between governments and private bond holders in drawing up a new rescue deal.

Evangelos Venizelos also said Greece remained on course to reach a primary budget surplus next year, despite missing key fiscal targets so far in 2011.

Greece is enacting major economic reforms alongside an austerity programme as it grapples with a national debt topping €340bn that have brought it to the brink of default.

Leaders of countries that use the euro are to attend the emergency talks in Brussels on Thursday amid fears the fallout from Greece's woes could spread to larger European countries. Borrowing costs in eurozone members Italy and Spain have risen alarmingly in recent days.

"Reaching a solution is attainable because this solution does not only include Greece," Mr Venizelos said at his central Athens office.

"At issue is the euro and the resilience of the eurozone. That is why protection of Greece is a self-defence mechanism for the eurozone. That will help us avoid a domino effect."

He described the recent pressure on Italian and Spanish borrowing rates resulting from bets against those countries and the euro by financial speculators.

"(We are witnessing) organised attacks on countries with very good macroecenomic data, such as Italy for example," he said.

"There is no panic, this is a very cool-headed and well-organised attack."

Greece is being kept afloat by emergency loans from other eurozone members and the International Monetary Fund, but remains locked out of bond markets by high interest rates and will require a second bail-out expected to involve a similar amount.

"We want a solution that makes our national debt sustainable ... guarantees Greece's borrowing needs until in mid-2014 when we foresee our return to the markets, and guarantees the liquidity of Greek banks," Mr Venizelos said.

A new bail-out deal is likely to involve banks and other Greek bondholders making voluntary contributions to deferring Athens' debt payments. But rating agencies have warned private involvement could prompt them to further downgrade Greek credit status to selective default.

Details of that potential arrangement are being negotiated at talks between European Union officials and private investors in Rome.

Mr Venizelos said Greece was hoping to avoid being placed under the selective default rating - an assessment that could plunge Europe's worsening debt crisis into greater turbulence - and indicated progress had been achieved in Rome.

"Our aim is to avoid even a selective default," he said. "There are proposals that provide an answer to what is sought and at the same time do not permit ratings agencies to issue that rating."

He added: "I believe we will be able ... to achieve something which will be secure, positive for the viability of the public debt, and will safeguard Greece as a country and the Greek banking system."

Mr Venizelos said Greece had already taken the toughest measures needed to steer the economy back to fiscal health.

The Socialist government has faced months of anti-austerity protests, and has seen a recent slump in popularity and struggling with unemployment that topped 16% in March. Weak tax revenues have kept Greece from meeting its ambitious fiscal targets this year.

In the latest sign of public discontent, taxi drivers blocked roads to the country's main airport and harbour yesterday during a two-day strike at the peak of the vital tourist season.

They were protesting against proposed changes in licensing laws that would make it cheaper to operate a taxi.

Hundreds of cabbies later drove to parliament in central Athens, honking their horns, shouting slogans and creating major traffic jams on one of the hottest days of the summer. More protests are planned today.