A senior European official has vowed that a Greek default was not an option and would be avoided, even after Athens' admission that it would miss its deficit-reduction targets raised questions about whether it would receive its next bailout loan.

European Monetary Affairs Commissioner Olli Rehn has said the terms of Ireland's bailout loan from the ECB should be extended from three years to seven.

A European bail-out deal for Greece will give the country a "breathing space" to escape from its spiral of debt, European Monetary Affairs Commissioner Olli Rehn said today.