ATHENS (Bloomberg) - Greek Prime Minister George Papandreou said sceptical investors will in time come to believe his measures to reduce the European Union's (EU) second-biggest budget deficit are changing the way his country operates and avert concerns about default.

"I know that markets aren't convinced," he said in a radio interview on Sunday on "Bloomberg on the Economy" with Tom Keene. "I know that, I've lived through this crisis. They're not going to be convinced by political programmes. But they will be convinced if we do have results."

Officials from the EU, European Central Bank (ECB) and Intenational Monetary Fund (IMF) said last week his programme is "on track on all of the main dimensions". They are charged with ensuring Greece sticks to its pledge to reduce a budget deficit of 13.6 percent of gross domestic product in return for 110 billion euros ($137 billion) in rescue loans. Papandreou has cut spending and wages and raised taxes to bring the gap to under the three percent EU ceiling in 2014.

"There are a number of things that show we are on a different path eight months after we've taken on a government in a crisis," Papandreou said in New York, where he came for a two-day meeting of the Socialist International, a global organisation of social democratic, socialist and labor parties he has headed since January 2006.

He cited comments from the EU, ECB and IMF officials, dubbed the "troika" in Greece, that the country is ahead of the deficit target of 8.1 percent for this year and that tax increases are boosting revenue. The officials also said there are signs the economy may not shrink as much as the four percent forecast by the EU and IMF.

Greece's austerity measures have sparked dozens of anti-government demonstrations, including one in which three bank employees were killed. Papandreou has said resolving the financial crisis is a political and economic challenge he must win. Failure by the 58-year-old, US-born leader threatens default on the country's debt.

Papandreou said in the interview he's encouraged and "cautious." He has promised spending cuts and tax increases equal to 14 percent of Greece's 237 billion-euro gross domestic product in a bid to bring Greece's deficit within the EU limit. That may deepen a yearlong recession and boost unemployment, which rose to a 10-year high of 11.7 percent in the first quarter.

The ASE Index advanced 42.21, or 2.7 percent, to 1,585.20 as of 4 p.m. in Athens trading, the biggest gain among 18 western European benchmark indexes today, narrowing its loss for the year to 28 percent. The FTSE/ASE 20 Index of Greece's biggest companies rose 2.9 percent to 758.01.

Euro-area governments and the IMF will halt payments from the aid package, approved last month, if quarterly reviews show Papandreou is failing to meet deficit-reduction targets.

The threat reflects Greece's history of understating its deficit. Within weeks of Papandreou's victory on October 4, his new government revealed that the shortfall would be more than 12 percent, four times the EU limit and twice the previous government's estimate.

EU scrutiny since then has shown that Greece shouldn't have qualified for the euro, as it never managed to keep the deficit under the three percent limit.

Greek 10-year government bond yields were about 1.4 percentage points, or 140 basis points, higher than benchmark German bunds at the beginning of October as Papandreou came to power. The so-called yield spread widened to as much as 965 basis points on May 7. It widened a basis point today to 670.

Spreads for Spain, Portugal, Italy and Ireland widened in the wake of concerns about Greece, even after the EU and IMF pledged the loans to Greece. That prompted the EU to set up a broader 750 billion-euro financial backstop in May for the entire euro region. Spain has the EU's third-highest deficit, Greece is the second-highest, while Ireland has the highest.