Reform Key to Greece Recovery: Dallara

A burden has been lifted off Greece's back, but the country will need to stick to its proposed reform to become a successful economy once again, Charles Dallara, managing director of the Institute of International Finance told CNBC.

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“We’ve given Greece a huge breathing space so they now have a burden lifted off and an opportunity to pursue reforms that are needed," Dallara said on the sidelines of the China Development Forum.

The IIF was the central private sector body involved in the successful negotiation of the country’s debt restructuring.

Dallara warned that it was too early to assume that the debt crisis in the euro zone had been resolved and said the growth problem in Europe had not been tackled by Europe’s leaders.

“It is too early to tell. They have an opportunity now with the ECB (European Central Bank) providing liquidity, cutting interest rates. The environment is gradually improving there. There is a lack of a comprehensive recipe for growth and this worries me,” he said.

He added that leaders in the region needed to focus on long-term fiscal discipline, not just the short term.

Many of Europe’s ailing economies including Greece, Ireland,Portugal and Spainare in the midst of deep austerity programs which have been intensely unpopular among citizens in many of these countries with protests turning violent in some cases.

Dallara admitted that the challenge of balancing austerity with a program for growth was a central challenge, the solution to which had so far eluded regulators.

“It is not just balancing fiscal austerity and economic growth, which is a huge challenge, but balancing regulatory reform versus providing credit to support economic recovery. Right now there’s just too much focus on austerity,” Dallara said.

He said regulators needed to rebalance things otherwise it would be very difficult to revive growth especially within Europe.

Some market analysts believe that a "wait and see" approach has been adopted by Europe’s leaders.

“There is not much else that they (European Central Bank) can do apart from perhaps reduce the deposit rate.

They feel they’ve done the absolute most they can,” Nick Beecroft senior market consultant at Saxo Bank, told CNBC.

He reiterated the notion that Greece is unlikely to remain inside the euro zone by 2015, a sentiment that has gathered pace outside of official quarters despite the approval of the second 130 billion euros ($172 billion) bailout as austerity has overshadowed any semblance of economic growth.

“This is a landscape of unending austerity, a bleak landscape of increasing unemployment and we can see these social tensions arise more so in coming months. I am fearful of success on that front,” Beecroft said.