In a vital speech to business leaders outlining measures to pull Greece out of its worst economic crisis in decades, the Greek premier, George Papandreou, called for the country to change its ways.

Papandreou said sweeping public spending cuts would be needed to head off the country’s 300-billion-euro ($440 billion) mountain of debt.

"We need to move immediately to a new social deal," Papandreou said, aiming to reassure markets and EU partners. "We must change or sink," he warned.

Papandreou vowed to slash public deficit in line with euro zone requirements by 2013. The deficit "will be lowered to below 7 percent of GDP from 2011" and will be "less than 3 percent of GDP by 2013," he said in the speech.

Greece's deficit is set to rise to 12.7 percent of gross domestic product this year - well beyond the 3 percent limit imposed by the euro zone.

Papandreou's new Socialist government has come under intense pressure from its EU partners and rating agencies to take drastic measures to cut the deficit.

No more comfort

The prime minister also called for unity, saying that in the next three months his government would take decisions that have not been taken for decades. Some of these decisions would be painful. "We must all lose our comfort," he said.

Papandreou said that among the measures taken to slash Greece’s deficit would be sweeping public spending cuts. He said these could include curbs on public sector hiring and pay, a 10-percent cut in social security and "a significant reduction in military expenditures."

He also proposed a 90 percent tax on bonuses at banks and a revamp of the Greek fiscal system in an effort to boost state revenue.

The prime minister added that the country "has lost every trace of credibility," before warning that markets wanted to see action.

Greek markets have taken a beating after the global ratings agency Fitch downgraded Greece's ratings for the first time in a decade last week, on concerns about the fiscal situation.

bk/Reuters/AFP
Editor: Sonia Phalnikar