Restructuring Greece’s debt would be “catastrophic” for the country’s credibility and its economy, said prime minister George Papandreou (photo, from bbcimg.co.uk).
According to him, if debt repayments were suspended, Greece “would head towards a potential and probable collapse of the banking system”, which could lead to the loss of Greek families’ property, and that would be “a tragedy”.
He made those comments after the IMF agreed to give Greece a new loan.
International rescue loan
Greece is imposing tough economic measures such as pay cuts and tax rises in return for a massive EU-IMF bailout to stave off bankruptcy, after debts close to 300bn euros were revealed.
The aim is to reduce the budget deficit from 13.6% of annual output in 2009 to 8.1% this year, through strict financial controls.
On Friday the IMF said it would provide Greece with 2.5bn euros ($3.2bn), its share of a fresh 9bn euros loan instalment. The rest of the money will come from the EU.
As Greek economy went into meltdown earlier this year, an international rescue loan was decided.
Of the 110bn euros rescue loan, Greece has already received 20bn euros.
Earlier this week, data showed Greece’s economy shrank 1.8% in the second quarter.
EU and IMF inspectors are due in Athens next week in order to review the progress of Greek austerity measures.
Although those measures were implemented to tackle the massive debt burden, they have led to widespread protests and strikes.
Mass protests were staged on Saturday by Greek unions in the city of Thessaloniki.