Greece sought to play down reports on Friday it was considering solutions involving greater losses for its banking creditors while a fresh round of strikes gripped the country in protest against new budget austerity steps.
Domestic political commentators say the odds are that parliament will pass measures including unpopular new taxes to secure the next tranche of its EU and IMF bailout, avoiding a disorderly default that would rock the euro zone.
Popular resistance to the cutbacks is growing, however, reflected by strikes that have brought the transport system to a halt this week, with strikers arguing that Greece's economy cannot cope with the terms of the deal imposed on it.
Two pro-government newspapers reported Finance Minister Evangelos Venizelos had told ruling Socialist deputies he saw three scenarios to resolve the crisis, including one involving a larger 50 percent haircut for bondholders.
That amount was more than double a figure agreed in July by some European banks that said they would contribute to a bailout by taking a 21 percent loss on some Greek bond holdings in a debt restructuring deal.
But a high-level government source denied the reports and Venizelos, heading to Washington for talks with Greece's lenders, said the country was committed to implementing the second, 109-billion-euro bailout it has agreed to.
"All other discussions, rumours, comments, and scenarios, which are diverting our attention from this central target and Greece's political obligation ... do not help our common European task," he said in a statement issued by his ministry.
Citing a person who it said had heard the speech, newspaper Ta Nea quoted Venizelos as saying "it would be dangerous to request" the 50 percent haircut -- the term used to describe a cut in value of a security held by an investor.
Venizelos also said: "This would require an agreed and coordinated effort by many", the paper reported.
Greek bank stocks, under pressure from a downgrade by ratings agency Moody's, fell a total of 8 percent after the reports.
“No such scenario”
Three Socialist deputies who said they were present at the session at which Venizelos tried to rally support in the ruling party for a new austerity campaign, also denied that he had floated the idea during his speech.
"I categorically deny it. There is no such scenario," lawmaker Theodora Tzakri told Reuters.
In Washington at the IMF's annual meeting, Venizelos will hold talks with officials from the IMF and the EU who have expressed impatience with the lack of progress in cutting back a bloated public sector, threatening to withhold funds.
The cabinet's latest round of cutbacks in response include cutting the salaries of 30,000 public employees and giving them a year to find new work or lose their jobs, as well as deeper pension cuts and the extension by two years of a real estate tax hike imposed to make up for a shortfall in budget revenue.
Analysts say the measures will pass in parliament and should be enough to persuade the IMF and EU to release an €8 billion ($11 billion) aid tranche that Athens needs to avoid running out of cash to pay civil servants' salaries in October.
The first hurdle comes next Tuesday when lawmakers will vote on the original property tax hike introduced earlier this month. The government aims to extend the tax and draw up laws for the other new austerity steps once they have agreed with the troika.
"I don't believe there will be any problem in the vote next week," said Costas Panagopoulos, head of ALCO pollsters.
Strikes on Thursday snarled traffic and stranded tourists at hotels in Athens, while activists marched on parliament in the first big demonstrations since violent clashes with police in June. Athens metro and trams were on strike on Friday and taxi drivers will walk out for 48 hours ahead of the vote next week.
The country remains bitterly divided between private sector workers who say a bloated state bureaucracy is strangling Greeks and public servants who say the biggest problems are political corruption and tax evasion.
Unions say austerity measures will put further pressure on a middle class already hit by an economy expected to contract by at least 5 percent this year, after a 4.4 percent slump in 2010, and unemployment of 16 percent.
"When we see that there is not a rudimentary equal distribution of the weight and it all falls on the usual people, the wage earners and pensioners, how can we not react?" said Yannis Panagopoulos, head of private sector union GSEE.
($1 = 0.743 Euros)