Greece must stay in euro, needs drastic reform: PM

Athens: Greece needs to stay in the euro and realises its economy needs drastic reform, the country's prime minister said in a letter to international creditors in which he promised to stick to the terms of a debt reduction deal.

The European Union had demanded the assurance from Prime Minister Lucas Papademos, and similar written pledges from leaders of the two parties that back his coalition government, before releasing an 8 billion euro tranche of aid which Greece needs to avoid bankruptcy next month.

"The Greek people recognize the need for a major economic and institutional transformation and they overwhelmingly support euro area membership, which they perceive as crucial for the success of this effort," Papademos said in the letter he sent to the European Union, the European Central Bank and the International Monetary Fund on Tuesday.

"The government will take all measures necessary in order to implement the decisions of the Euro Summit of 26 October 2011 and achieve the objectives of the economic programme," he wrote in the letter, which his office sent to journalists on Wednesday. He referred to an October 26 EU deal to cut Greece's crippling debt.

"(The government) is determined to continue the process of fiscal consolidation and structural reform in order to secure sound public finances and improve the country's international competitiveness," he added.

EU finance minister agreed to release the 8 billion lifeline tranche on Tuesday after receiving the prime minister's letter.

Papademos, a former vice president of the ECB, was appointed by Greece's two major parties to lead a national unity government earlier this month, with the task of implementing the October 26 debt cut deal.

Disbursement of the 8 billion euro tranche remained in limbo, however, because conservative party leader Antonis Samaras initially balked at providing the written pledges the EU had demanded.

Euro zone membership is necessary for Greece to overhaul its economy, Papademos said, dismissing the view proposed by some economists that the country might be better off outside the single currency.

"Participation in the euro area ensures the preservation of price stability, promotes financial and economic stability and facilitates the implementation of the deep and broad reforms required for the revival of the economy," Papademos said in the letter.