Greece's prime minister warns that returning to the nation's pre-euro currency, the drachma, would cause 'devastating' high inflation, exchange rate instability, loss of value of bank deposits

ATHENS, Greece , March 30, 2012 () – Greece's prime minister warned that a return to the country's pre-euro currency, the drachma, would be "devastating" for the economy.

Lucas Papademos told the Italian newspaper Il Sole 24 Ore in an interview published Friday he was confident that strong public support in crisis-hit Greece for remaining in the euro would be reflected in the results of a general election, expected in late April or early May.

Parties backing Papademos' four-month-old coalition government are facing a growing challenge from political groups that oppose the terms of bailout agreements with rescue lenders from the European Union and International Monetary Fund.

"The consequences would be devastating. A return to the drachma would cause high inflation, unstable exchange rate, and a loss of real value of bank deposits," Papademos was quoted as saying.

"Real incomes would drop sharply, the banking system would be severely destabilized, there would be many bankruptcies, and unemployment would increase. A return to the drachma would increase social inequalities, favoring those who have money abroad."

Greece narrowly avoided bankruptcy this month by securing a massive debt restructuring deal with banks and a second EU-IMF bailout that will see it receive €130 billion ($172.5 billion) in new loans as well as some €42 billion ($55.7 billion) from a previous rescue package.

Papademos said he could not rule out the need for a third rescue package in the future but said the country would do "everything possible" to avoid it.

"It is conceivable that some form of financial assistance may be necessary, but we must work hard to prevent this occurrence," he said.

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