Lucas Papademos has said Greece cannot exclude the possibility of needing a third bailout from the eurozone (Reuters) REUTERS

Greece may need a third multi-billion euro bailout from the eurozone and International Monetary Fund (IMF) to help rebuild the ruins of its economy and to avoid defaulting on its vast debts, the country's prime minister said.

The country's government will strive to avoid having to hold out the begging bowl for a third time, Greek premier Lucas Papademos told an Italian newspaper, but he would not rule out a need for more cash.

"Greece will do everything possible to make a third adjustment programme unnecessary," Papademos, who was head of the European Central Bank before being appointed as prime minister in November, told Il Sole 24 Ore.

"It cannot be excluded that some financial support may be necessary, but we must try hard to avoid such an outcome."

Recently a second eurozone-IMF bailout for Greece, which has been in recession for four years, was agreed at a total of €130bn (£108.4bn), though there were conditions on this loan.

Private investors in Greek debt had to write down the value of their investment by 53.5 percent, else risk losing everything from a Greek default.

The government had to expand its austerity programme, which should cut Greece's debt burden from 160 percent of its GDP to 120 percent by 2020.

Public sector jobs are being cut, workers are having their wages frozen, welfare payments are being slashed, and taxes are being raised.

Greece's offical unemployment rate is currently more than 20 percent.

"Markets may not be accessible by Greece even if it has implemented fully all measures agreed upon," Papademos warned.

"The real economy is still weak, and high unemployment is likely to persist in the near future. The challenging period ahead of us needs to be addressed with great care.

"If we do things right, implementing all measures agreed upon in a timely, effective and equitable manner, and if we explain our policy objectives and strategy convincingly, public support will be sustained.

"An improvement in confidence would have a positive multiplier effect on economic activity and employment."

Greece had high public debt levels even when it entered the single currency area in 2001, replacing its drachma with the euro.

After joining the euro it continued to increase its public spending and borrowed more and more money by issuing Greek sovereign bonds to pay for this.

When the world entered a financial crisis in 2009, Greece's vast debt levels were exposed and investors fled the Balkan country, pushing its borrowing costs up before they became so high that the government could no longer afford to pay its debts and sustain its significant public spending.

Since then it has emerged that Greek ministers had been masking the true scale of the country's debt, further deepening the country's deficit problem.

If Greece defaults it is feared the knock-on effect would drag other ailing European economies down with them - possibly plunging the eurozone into recession.