But in the first five months of this year, the deficit was down 40 per cent compared with the same period in 2009, he told the global association of bankers.

While revenues were up, expenditures had been severely curtailed, he added.

"We are still on the very start of our three-year economic programme, yet we are very far from our initial point eight months ago," he said, adding that his goal was a "complete reorientation" of the Greek economy.

Papandreou said his government made a conscious decision against default and against leaving the euro, a decision that made "good economic sense" and repeated a pledge that the country would pay its dues.

"We will honour our contracts with the financial community and yes, we will pay our debts," Papandreou told the IIF lobby group of some 400 of the world's top financial institutions.

'No free money'

"This - let me stress again - is no free money," he said. "It is loans to be paid back with substantial interest and it is a package to support change in Greece, not to return to negative practices.

"We take our mandate for change very seriously. And I have absolutely no intention to give up or back down," he said, adding: "I do not care if this is my only term as prime minister - I have done what I thought was necessary to save Greece from disaster."

"I do not care if this is my only term as prime minister - I have done what I thought was necessary to save Greece from disaster"

George Papandreou, Greek prime minister

The audience gave the premier a standing ovation and host Josef Ackermann, the IIF chairman, announced a U-turn on earlier scepticism about Greece's ability to overcome the crisis.

Ackermann, who is also chief of Deutsche Bank, Germany's largest bank, had said last month that he doubted Greece could turn the corner.

But on Friday he said: "Based on the personal commitment by the prime minister to implement the necessary reforms, even sacrificing his own political future, I'm convinced that it will enable [Greece] to allow them to service its debt."

At a European level, Papandreou also called for a "permanent stabilisation fund, a new European Monetary Fund financed by contributions of eurozone members proportionate to the size of their wealth".

And addressing recent, sometimes violent, protests at home over tough austerity measures, Papandreou said Greeks wanted a turnaround.

"Yes, these are painful changes, and no one denies the difficulties for our people," Papandreou said. "We are a proud people. We want to see change."

He said scrutiny by ill-informed analysts, sensationalist journalists and others was undermining Greece's efforts to restore confidence in its economy.

"We are asking for the necessary respect and calm so that we can do our work under the best of conditions: when our citizens are not terrorised every single day with rumours about losing their money and returning to the drachma [currency] or being expelled from the European Union," Papandreou said. "This is obviously nonsense."