Austerity the only way to prosper, says former Greek PM

A rejection of austerity measures and of the eurozone bail-out in next month's fresh Athens election would be a catastrophe for the country, Greece's former technocratic prime minister, Lucas Papademos, said on Friday.

Papademos's warning in an official resignation letter came as signs emerged of a backlash in Athens against anti-bailout political parties over growing fears of the consequences if Greece were to be ejected from the single currency.

An opinion poll showed a clear lead for the pro-bail-out New Democracy party for the first time since the shock emergence of the hard-Leftist Syriza as a political force in the original May 6 elections. The poll predicted New Democracy would win 26.1pc of the vote compared with 23.7pc for Syriza. Papademos said a stand-off over the budget cuts and privatisation required by the euros 130bn (pounds 104bn) bail-out would unavoidably cost Greece's place in the euro.

"We are, once again, at a critical crossroads," Papademos wrote. "At a time when many countries, including in our neighbourhood, are working hard to win a place in the EU it would be tragic if we went in the opposite direction."

Alexis Tsipras, the Syriza leader, sought to play down fears over his party's radicalism by accusing its opponents of unfairly painting its agenda as euro exit.

"This scaremongering is being generated by political forces playing with fire and by speculators playing speculative games," Tsipras said after meeting European Parliament president Martin Schulz. "I expressed my conviction that Greece is, and must remain, an equal member of the euro area with obligations but also the rights that accrue to it from its membership.

Schulz used a joint appearance with Tsipras to highlight the dangers of the path. He said: "Many people believe that it would be the end of a negative cycle, but for me it would be the beginning of an even more negative cycle."

Panagiotis Pikrammenos, 67, the new caretaker prime minister, told his government it must avoid the public infighting that has frightened the markets.

"We must not forget that all of Europe is watching us. We must all work to steer the country to a safe harbour, " he said. "I would like this government to set an example of a different type of behaviour, which the Greek people, who have been severely tested, will be able to respect."