Greek PM confident over debt

Greece can meet the demands of international lenders and avoid defaulting on loans without needing to impose more austerity measures, Prime Minister George Papandreou has said.

Despite revenues lagging targets, the government is on track to meet deficit-cutting goals and its efforts will reassure international markets, which were rocked by the Greek debt crisis earlier this year, he told a news conference yesterday at an annual trade fair in the northern city of Thessaloniki.

"Debt restructuring would be catastrophic for the economy, our credibility and our future," he said. "We would be talking about the collapse of our banking system. It would be a tragedy for households. We are not even discussing it."

Greece must cut its budget deficit to 8.1 per cent of GDP this year from 13.6 per cent of GDP in 2009 to meet the terms of a €110 billion IMF/EU bailout.

But tough measures - taxes have been raised while state sector salaries and pensions have been cut - are hurting state revenues and economic activity, plunging Greece into a deeper recession. GDP is seen shrinking by 4 per cent in 2010.

Papandreou said budget revenues were indeed weak, with a slippage of nearly €1.5bn.