The public sector has borne the brunt of the Greek bailout to date, and the private sector must start making a greater contribution, Angel Gurria, Secretary-General of the Organization for Economic Co-Operation and Development (OECD), told CNBC Thursday.
The warning came after reports that banks will be asked to accept losses of up to 50 percenton their holdings of Greek debt by euro zone countries.
The struggling Mediterranean country's deficit has widened by 15 percent in the first nine months of 2011, despite two high-profile bailouts from other European countries worried about the possibility of contagion if Greece defaults.
"It has to be isolated and ring-fenced," Gurria said. "There has to be a division of the burden and the pain between the public and the private sector. The public sector is already doing it by keeping Greece going and now the private sector has to make a greater contribution."
Greece, one of the 34 members of the OECD, is struggling under the burden of the euro zone's highest debt levels. Austerity measures imposed as part of its bailout by the so-called "troika" of the European Central Bank (ECB), the International Monetary Fund (IMF) and the European Commission have been met with protests on the streets of Athens.
Gurria said that the deal agreed on July 21st was "not a tenable solution" without further help.
"The deal on July 21st extends the maturity (of the EFSF loans) but doesn't reduce the burden of debt," he said.
"In fact, it increases it because Greece has to buy some zero coupon bonds at its expense in order to gain the promulgation of maturities for the banks. That's not a tenable solution."
Shift in Power
Some analysts believe that the current crisis, which has slowed growth and increased unemployment in the US as well as the euro zone, is part of a gradual shift in economic power towards emerging economies.
Markets have been unsettled for months as uncertainty over the future and how the developed world will tackle its debt burdens spooked investors.
"We have to have a careful balance between maintaining the recovery and at the same time giving off signals that we are going to deal with the problem of deficits and accumulation of debt which has come to an average of beyond 100 percent debt to GDP in the OECD countries," said Gurria.
"That's unsustainable but we don’t want to kill the recovery and at the same time we have to take care of high numbers of structural long term unemployment and unemployment of youth. We have very little fiscal room in this crisis," he added.
He said that now was the time to start thinking about medium to long-term structural changes to OECD economies.
Gurria praised the establishment of a bipartisan committee as "a very good beginning" to solving the US's problems.
"In the US, you need to give a medium and long term signal that the deficit and accumulation of debt have been dealt with. In the short term, you can accommodate packages like the jobs package."
He denied that there was a "sharp slowdown" in emerging markets growth, and said that, in countries like China and India, he welcomed a slight deceleration if it meant their economic growth was "more sustainable."
The rise of unemployment around the developed world is also causing worries in the market. Gurria pointed out that the reliability of unemployment figures from country to country varied because of different levels of "informal" employment and the lack of unemployment benefits in some countries.
"What we see in larger economies today, the traditional locomotives of growth, is that there were 14 million jobs lost (since the crisis began)," he warned.