UPDATE 1-Greek PM says Greece needs new social deal

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ATHENS, Dec 14 (Reuters) - Greek Prime Minister George Papandreou said on Monday that debt-laden Greece needed a new social deal and must change or sink.

“We need to move immediately to a new social deal,” Papandreou said in an economic policy speech aiming to reassure markets and EU partners. “We must change or sink,” he said.

Greece’s new Socialist government has come under a barrage of pressure from its EU partners and rating agencies to take drastic measures to cut a deficit seen at 12.7 percent of GDP this year and public debt expected to reach 121 of GDP in 2010.

Papandreou said the new Socialist government must take in three months the decisions not taken in decades by previous administrations, and warned that some changes will be painful. “We must all lose our comfort,” he said.

Greek markets have taken a beating after Fitch downgraded Greece’s rating to a BBB+ for the first time in a decade last week, on concerns about the fiscal situation.

Yield spreads between 10-year Greek government debt and benchmark 10-year euro zone debt widened marginally during Papandreou’s speech. The spread, which is closely monitored to gauge investor sentiment, widened by 5 basis points to 232 basis points from 227 basis points. (Reporting by Dina Kyriakidou; Additional reporting by Daniel Bases; Writing by Ingrid Melander; Editing by Ron Askew)