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Papandreou: Greece won't default on debt

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Greek PM: All will defend the Euro
  • Prime Minister Papandreou: Greece will not default on its debt payment obligations
  • "Obviously (it will be) difficult, but we have been doing our work"
  • A recent survey showed about 75% of respondents thought Greece would default
  • Papandreou echoed the French president's sentiments that the euro won't fold
  • Davos
  • World Economic Forum
  • Greece
  • EU Economy

Davos, Switzerland (CNN) -- Despite deep public spending cuts that triggered waves of protests last year, Greece will not default on its debt payment obligations, Prime Minister George Papandreou told CNN.

"This is not on the books ... it's not on our road map. And this is why we are talking about these other measures, which we think are enough to be able to make things sustainable," Papandreou told CNN's Richard Quest on the sidelines of the World Economic Forum in Davos Thursday.

"Obviously (it will be) difficult, but we have been doing our work, and we will be successful," he said.

The economic troubles in Greece last year sparked a wave of sovereign debt woes across Europe, especially hitting Ireland, Spain and Portugal. The value of the euro cratered during the debt crisis and raised lingering questions about the viability of the 17-nation monetary union.

A Bloomberg Global Poll released this week at Davos show 59% of respondents believe that at least one or more euro nation would break from the monetary union by 2016, and nearly three-quarters polled thought Greece would default on its loans.

"Well, maybe people will believe things, but that's why we politicians are here, to put things on the right course," Papandreou said when asked about the poll. "And there is the political will of our peoples and the leaders of the European Union ... to make sure that in 2016 and 2020 and on, the euro will exist."

His comments echoed the sentiment French President Nicolas Sarkozy who in his Davos address Thursday said: "We will never abandon the euro. Never! Euro spells Europe, the euro is Europe. Europe has meant 60 years of peace on our continent. We will never abandon that."

Sarkozy's spirited defense of the euro underlined how high the stakes have become for the economic evolution of the continent. "To imagine that we might pull out of that is to ignore the fact that as people who have been at each other's throats for centuries, we now have one wish, and that is lasting peace," Sarkozy said.

But European Monetary Union has been challenged as the bailout of Greece thrust the spotlight on the uneven economics among member nations. Besides debt woes in Greece, countries like Ireland and Spain were deeply exposed to the crash of the housing bubble. Meanwhile, the German economy -- the largest in Europe -- enjoyed its fastest expansion in two decades last year and its largest growth in GDP since Germany reunified in 1990.

Concern has grown of an unfair burden placed on larger economies by the problems of smaller economies like Greece. But Papandreou said Greece is well on its way toward reducing its debt.

"We have made very good progress, because we're on track, and I would say, even, beyond. We have cut the deficit by over 6.5 percent, which is a huge cut," Papandreou said.

"We've changed our pension system, it's now a viable pension system, one of the most viable in Europe. We've changed our tax system, it's transparent, more effective, hitting tax evasion," he said. "But the structural things we're changing are actually going to bring growth."

Jean-Claude Trichet, the president of the European Central Bank, told CNN "this is no time for complacency -- that is absolutely clear. But let me tell you, nevertheless, that the real economy is giving signs that are encouraging.

"The main risk is to practice benign neglect ... as soon as things are going better, to forget that we had to cope with a very, very demanding crisis," Trichet said. "So, we have to draw all the lessons."

CNN's Richard Quest, Kevin Voigt and Bryony Jones contributed to this report.