12 September 2010 Last updated at 08:22 ET

Greece PM rules out restructuring of national debt

George Papandreou: "I am confident that this confidence that is growing"

Greek Prime Minister George Papandreou has said restructuring the nation's debt would be "catastrophic" for the country's credibility and its economy.

If debt repayments were suspended, he said Greece "would head towards a potential and probable collapse of the banking system".

That, he said, could lead to the loss of Greek families' property, which would be "a tragedy".

His comments come after the IMF agreed to give Greece a new loan.

Budget deficit

Greece is imposing tough economic measures including 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.

It is hoped that strict financial controls will reduce the budget deficit from 13.6% of annual output in 2009 to 8.1% this year.

On Friday the IMF said it would provide Greece with 2.5bn euros ($3.2bn; £2.1bn), its share of a fresh 9bn euros loan instalment, with the rest to come from the EU.

Greece has already received 20bn euros of a 110bn euros international rescue loan, agreed earlier this year as its economy went into meltdown.

Protests

Data this week showed Greece's economy shrank 1.8% in the second quarter.

EU and IMF inspectors are due in Athens next week to review the progress of Greek austerity measures.

However those measures implemented to tackle the massive debt burden have led to widespread protests and strikes.

On Saturday Greek unions staged mass protests in the city of Thessaloniki.