A euro zone row over collateral to back loans to Greece has lost its explosive power under a plan that would let every member country decide for itself whether to make use of the facility, Austrian Finance Minister Maria Fekter told Reuters.

Asked if there had been a breakthrough on the collateral issue, she said: Some things have been prepared at the technical level. I don't think this is explosive any more.

She confirmed that the idea now was to make collateral so expensive that only Finland -- which had struck a controversial bilateral deal with Greece to get cash backing for loans -- would feel the need to make use of it.

Correct. That was the push that Austria gave in this direction, she said on Wednesday after briefing parliament's finance committee on the sovereign debt crisis.

We will see what the result is and whether it could be something for us, yes or no. It must basically be something that is feasible for everyone, she said.

It cannot be a contractually agreed privilege for Finland, but rather it must be a option that every individual country can decide whether to use it or not.

Austria has been a leader in insisting on equal treatment for all euro zone members when it came to Greek collateral.

Demands for collateral against Greek bailout contributions had further rattled investors' confidence in euro zone efforts to resolve the crisis afflicting its more vulnerable debtor countries.

Asked whether she thought a Greek sovereign default was still a taboo subject, Fekter said: It would be an incomparably more expensive way so I don't want to think in that direction, but rather continue the course we have started.

We all have to make an effort to regain the confidence of the market and that works only with a consistent stance and not by zig-zagging.

(Reporting by Michael Shields; Editing by Ruth Pitchford)