Greek Prime Minister George Papandreou warned on Friday his country was one step from being unable to borrow and appealed to labor unionists to support his efforts to escape a debt crisis shaking the euro zone.

Speaking to the country's biggest union, GSEE, which has staged protests and strikes against his austerity plan, Papandreou said he was battling against vested interests at home and market speculators abroad.

"We are in a state of war, in a battle against special interests, both at home and outside Greece," he said. "It is a battle against speculators and for transparency, so that markets are at the service of the people, not the other way around."

Addressing an applauding crowd at GSEE's annual congress in northern Greece, Papandreou painted a grim picture of the economy, saying serious shortcomings had hurt Greece's credibility in markets and eroded support from foreign partners.

"With full honesty towards Greeks, we talked about the point we have reached — one step from being unable to borrow," he said. "We must avoid paying usurious interest for decades, condemning the country to a deep recession."

The euro zone's weakest link, Greece wants the EU to come up with a clear support mechanism in order to fend off speculators and drive down its borrowing costs. EU leaders, dealing with crises at home, have been reluctant to help.

Papandreou shocked markets and EU peers when he revealed after coming to power in October that the budget deficit was higher than the outgoing conservatives had reported. Rating downgrades followed and Greece's borrowing costs rose to almost twice those of Germany as a 300 billion euro ($406.20 billion) debt loomed.

The ruling socialists imposed tax hikes and public sector wage cuts, prompting strikes and protests although opinion polls show a large part of the public supports the measures.

"We were forced to take the most difficult decisions ever taken by any government in this country," Papandreou said. "We are making efforts to reverse this course ... if we do not make sacrifices today, the problem will spiral out of control."

But he said all savings would be wasted if interest rates remain at present levels -- now at about 6.3 percent on 10-year bonds. He pledged to change Greece for good, eradicating corruption, waste and impunity in order to restore credibility.

"I want social partners, mainly workers, on my side, not against me," he said. "I promise to all workers and citizens, that our efforts will pay off."