* Says govt has to protect weakest in Greek society
* Says he, Merkel, Sarkozy wrote to Obama about CDS concerns
* All in place for Weds bond refinancing - govt official
(Adds EU payment due, changes dateline)
By George Georgiopoulos
ATHENS, May 17 (Reuters) - Greece's drive to cut its deficit will only work if combined with measures to stimulate growth and investment, the prime minister said on Monday, as Athens was poised to receive funds to cover a major debt refinancing due this week.
Fears that deficit-cutting in Greece and elsewhere in the euro zone will hurt growth were at the forefront of investor concerns on Monday, sending the single currency to a four-year low and fuelling fears it may face freefall. [ID:nLDE64G0VE]
Greece is seen by many economists as a bellwether for other vulnerable euro zone economies, being the first to tap an EU-IMF aid mechanism to service a 300 billion euro debt.
Athens has already received 5.5 billion euros in aid from the IMF and is due to get more from the EU on Tuesday to pay an 8.5-billion euro bond maturing on Wednesday.
"The money has been secured, everything is in place," said a government official who declined to be named.
Greece was obliged to impose drastic pay cuts and tax hikes in return for the 110 billion euro ($140 billion) EU/IMF bailout. Having staved off imminent default, it must now make sure revenues spur growth, Papandreou said.
"This savings programme was the only way to avert the threat of a state bankruptcy," Prime Minister George Papandreou told Germany's Handelsblatt newspaper. "The programme can be sustainable only if we stimulate investment and growth."
Austerity measures are expected to further hurt the economy, which plunged into its first recession in 16 years last year and is forecast to contract by 4 percent in 2010.
Investors are now watching the reaction of a restive Greek public and whether the Socialist government can withstand the pressure.
Large, sometimes violent protests against the government have rocked the Greek capital and labour unions have called a general strike and major demonstration for May 20.
For now though, opinion polls show most Greeks think the EU/IMF package was necessary, but are angry because they believe ordinary people will bear the brunt of the suffering while politicians and the rich continue to be pampered.
While the government has pledged action against corrupt politicians, many Greeks are now hungry to see heads roll.
SAFETY NET
As the austerity measures begin to bite, anger could rise more with the poor suffering most from cuts in public spending.
"I believe we can implement our programme. But we must ensure the weakest in our society don't fall into the abyss," Papandreou said. "We can't push people below the poverty line.
"Part of our savings programme is therefore a safety net. That will cost money but we have to do it."
According to newspaper reports, the German government is to press other euro zone countries to adopt tighter fiscal rules to match Berlin's balanced budget law, which prohibits the federal government from running a deficit of more than 0.35 per cent of GDP by 2016.
A finance ministry spokesman declined to comment, but said the government was drawing up plans to boost the euro and avert future debt crises, to be presented to a euro zone working group on Friday. [ID:nLDE64G1E5]
Asked to comment on market concerns over implementation risks and whether the belt-tightening would be too much to bear for the economy and the government, Papandreou said:
"We now have the chance to prove that we can achieve it. If everyone says the Greeks can't achieve it, then they will condemn us to fail.
"We're not begging for gifts of money, but asking for loans which will be paid back with high interest rates. I'm sure Greece is a good investment." Papandreou also criticised financial markets for overreacting to Greece's debt crisis and accused speculators of helping to provoke panic reactions.
"Angela Merkel, Nicolas Sarkozy, Jean-Claude Juncker and I have suggested in a joint letter to Barack Obama whether the markets for credit default swaps ... should not be closed. The G20 countries want to discuss this," he said.
On Sunday, Papandreou told CNN that Greece may investigate U.S. investment banks and their role in the run-up to the Greek debt crisis which has shaken faith in euro zone economies. [nLDE64F0BB]
(Writing by Jon Hemming; Editing by John Stonestreet)