Greece will cut its budget deficit and avoid default, while the European Union should help the country deal with “speculative attacks” in financial markets, says Nobel laureate Joseph Stiglitz.

“I’ve been very impressed with the comprehensive approach they’ve had,” Stiglitz tells Bloomberg.

“There’s clearly no risk of default. I’m very confident about it.”

Greece is struggling to cuts its budget deficit to 3 percent of gross domestic product from 12 percent.

Greek Finance Minister George Papaconstantinou has failed to convince investors that he can narrow the deficit to 3 percent, the limit set by the European Union, which has led to speculative attacks on Greece in financial markets, says Stiglitz.

“Speculative attacks” in financial markets on Greece pose “a real problem, because if interest rates go up, that increases deficits because you have to pay more in interest, and that can start a vicious spiral that undermines confidence.”

“That’s why it’s very important for Europe to come forward as an act of solidarity.”

Greek two-year bond yields have surged amid the crisis while the country's benchmark stock index, the ASE Index, has dipped by more than 15 percent since the start of the year, according to Bloomberg.

The European Union's government-backed lender, the European Investment Bank, has said that it cannot bail out Greece or any other European country that cannot pay its debts, according to the Associated Press.

The bank has said it could “only finance economically viable projects” but adds that its rules do not allow it help a country cover a budget deficit.