Greece Had 'Lack of Credibility:' Prime Minister

The government of Greece suffered from a "lack of credibility" that worsened the nation's sovereign debt crisis, Greek Prime Minister George Papandreou told CNBC Monday, in a candid discussion of the country's recent fiscal makeover.

"This is a daily process of really showing our committment," Papandreou, who was elected in late 2009, told CNBC's Closing Bell. "That Greece has been undervalued and Greece can be a long-term very good investment on people's money."

Papandreou also said that Greece is not yet prepared to return to financial markets, adding that loans from the International Monetary Fund and the planned issuance of "diaspora" bonds to Greek expats have given the nation "breathing space" to make stiff structural changes.

"Of course, we want to get out to the markets as soon as possible and that's why we are taking all these measures," Papandreou said, citing drastic changes to the country's pension and tax systems as examples of its committment to fiscal austerity. He also said that the nation has drastically reduced the size of its government—cutting the number of local governments, for instance, from 1,300 to just 340.

These changes are beginning to pay off, Papandreou said.

"We're on target for cutting the deficit by 40 percent," he said. "We are a bit lacking in revenue but we have compensated that by cutting down more in our costs and spending."

The prime minister also noted that despite some public outcry, he believes "people did want change."

"Yes it is painful—yes, there will be demonstrations," Papandreou said, but added he believes citizens of Greece "realize we had way overshot in terms of deficit and debt and we had to take some very drastic measures."

"This is not simply dealing with our debt and deficit—this is changing Greece," Papandreou said.