By Steve Slater and Jamie McGeever
COPENHAGEN (Reuters) - A Greek exit from the euro zone would be "catastrophic" for the country, former prime minister Lucas Papademos said on Thursday, urging the Greek people to "stay the course" of painful economic reforms.
"The overall economic consequences of a Greek euro exit would be disastrous, or to use a Greek word, catastrophic," Papademos, also a former vice president of the European Central Bank, said in a speech at an Institute of International Finance conference in Copenhagen.
Papademos said international lenders should ease the terms of conditions imposed on Greece to help its recovery.
"In light of recent developments I believe it would be appropriate to extend the horizon of the fiscal adjustment process by at least one year," he said.
Greece will hold an election on June 17, which is being billed as a referendum on whether to stay in the euro zone.
"Today Greece stands at a critical crossroads," Papademos said.
A vote that resulted in Greece's leaving the euro would represent a "national defeat" because it would show the country had failed to put its fiscal house in order, he said.
Leaving the euro zone could, in theory, give the country more flexibility in terms of its fiscal plans. But in reality, it would lead to a double-digit surge in inflation, greater stress on the banking system and more difficulties for companies to access capital markets, he added.
Papademos said he supported setting up a new, independent, tax authority. "The fight against tax evasion must finally be won," he said, adding this required political will and institutional change.
Papademos was prime minister from November 2011 to May 2012, helping push through a deal to restructure 206 billion euros ($259 billion) of the country's debt to try to put it on a sustainable footing.
($1 = 0.7960 euros)
(Reporting by Steve Slater and Jamie McGeever; Editing by Gary Hill and Dale Hudson)