Greece rejects any form of partial default on its debt, finance minister Evangelos Venizelos has said, denying remarks by the Dutch finance minister on the key euro zone question of private sector involvement.
Venizelos told journalists: 'We want total coverage of our borrowing requirements and for the stability of the Greek financial system which is part of the European financial system.'
This was an allusion to warnings by the European Central Bank that it may cease funding Greek banks in the event of a default rating, triggered by private involvement.
'This coverage must be offered either by the European Central Bank or by the euro zone and the member states, or by other bodies such as the support fund. There is no other possibility,' Venizelos said.
Despite the Irish Government regarding agreement at last night's eurogroup meeting as a breakthrough for Ireland's long term debt situation, the wider euro zone is still gripped by fears of contagion spreading to Italy and Spain, and by open divisions over whether or not Greece will default on its debts.
The question of what kind of role private creditors will play in a second Greek bail-out is proving as intractable as ever.
Essentially countries whose taxpayers will contribute the most want the private sector to be involved the most.
But such involvement will almost certainly mean a selective default of Greek debt - Dutch finance minister Kees de Jager said that ministers had effectively crossed the rubicon on that issue, despite the trenchant resistance of the ECB.
Asked about whether a selective default was now likely, he replied: 'It is not excluded any more.
'Obviously the European Central Bank has stated in the statement that it did stick to its position, but the 17 (euro zone) ministers did not exclude it any more so we have more options, a broader scope.'
That claim was denied by Luxembourg, while the German finance minister said a decision on Greece could wait until September.
Greek and other European banks have a liquidity problem and measures must be taken to resolve it, Venizelos said.
'There is a liquidity problem, a problem of covering the needs of banks, to the extent that the inter-bank market is not functioning fully.
'We have also witnessed these days pressure in the pan-European inter-banking market and so measures have to be taken.'
Venizelos added that Greek banks must not and would not run short of liquidity.
Separately, Euro zone countries and the IMF were told by a bank lobby group that they need to show they can deliver a rescue plan for Greece, including a debt buy-back, in the coming days to avoid financial markets 'spinning out of control'.
The Institute of International Finance, which is leading negotiations on behalf of banks with billions of euros of exposure to Greek bonds, made the warning in a draft paper delivered to European finance ministers, dated 10 July and seen by Reuters news agency.
'It is essential that euro area member states and the IMF act in the coming days to avoid market developments spinning out of control and risk contagion accelerating,' the paper said.
