Greece is not at the point where it needs a financial bailout and is in no danger of defaulting, European Central Bank president Jean-Claude Trichet said in an interview on Friday.

Default is not an issue, he told Italian paper Il Sole 24 Ore, reiterating comments he gave at an ECB news conference on Thursday whole stressing the importance a joint EU/IMF rescue promise given late last month.

Greece was not yet at the point where it needed to tap into the aid. At this moment in time I don't expect this mechanism to be necessary, he said.

Concerns over a possible Greek default escalated sharply on Thursday, driving down Greek asset prices and the euro.

Markets recovered slightly on Friday on speculation the debt-stricken country might soon receive help.

Finance Minister George Papaconstantinou said on Friday the country would not ask for the aid mechanism to be activated, and the current wide spreads on Greek debt did not reflect economic realities.

But markets still believe a potential trigger for a rescue could come early next week when Greece tests markets' confidence with a treasury bill auction.

The ECB was originally opposed to a rescue of Greece with the IMF but is now doing its best to show willing. Trichet, who has been criticized by analysts for giving it only lukewarm support, said it was a good and achievable solution.

The ECB extended a helping hand to Greece on Thursday by sparing government bonds from tougher penalties when banks use risky assets as security against cheap central bank cash.

Speaking in Paris, Christian Noyer, France's ECB policymaker, warned the troubles facing certain countries were a risk to banks holding the relevant sovereign debt, or related credit default swaps.

Trichet also said countries cannot flit in and out of the euro. One cannot jump in and jump out of the euro area as one hops on and off from a bus, he said.

Any country that wants to enter the euro zone had to respect the Maastricht criteria not just for one year but also in a sustainable way, he added.

(To see transcript of interview please click http://www.ecb.int/press/key/date/2010/html/sp100409_1.en.html)

(Reporting by Stephen Jewkes and Marc Jones in Frankfurt; editing by John Stonestreet)

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