When you hit hard times, it is time to pawn or part with the family silver – and an unprecedented clearout is now under way in Athens.

Greece has announced it will sell anything it can do without – and in the case of the debt-choked nation that means letting go of islands, royal palaces, prime real estate, marinas, airports, roads, the state-owned gas company, lottery and post office. Indeed anything, really, that can be sold.

On Wednesday, the nation learned the downsizing would also include diplomatic residences abroad – starting with the Victorian townhouse that was once the Greek consul general's residence in London.

"There is a decision to lease and sell properties that for various reasons are not being used," said Gregory Dalevekouras, spokesman at the foreign ministry. The foreign ministry's finance department, he said, was hard at work evaluating "market conditions".

The sell-off emerged just a day after Athens's finance minister revealed what most Greeks feared but had never been officially told – that with national income projected to fall 25% by 2014 their economy is not just shrinking but slipping inexorably into a 1930s-style Depression. And officials are now working frantically to get the mother of all firesales off the ground.

For potential buyers of ambassadorial homes and consul's quarters, the good news is that the foreign ministry is fully aware of what and where the properties are – unlike the Greek state, which until recently was still struggling to attain an inventory of what it actually owned given the lack of a proper land registry.

High-end estate agents are already being sounded out to sell the 10,000 square foot consular residence in London's upscale Holland Park – which is currently being renovated.

Property experts say homes similar to the 115-year-old stucco-fronted townhouse fetch rents of around £25,000 a week and could sell for as much as £12m. Richard Branson, a neighbour, put his own home on the market for £17m last year.

Since the outbreak of Greece's great economic crisis in late 2009, the country's diplomatic presence abroad, like so much else, has been dramatically scaled back as governments have sought to rake in expenditure. The consulate in London, home to a thriving Greek community, was one such victim.

In what will be surely be sad news for another UK resident, Constantine, the former king of Greece, officials have also let slip that the Tatoi palace, the royal family's historic estate at the foot of Mount Parnitha, will be sold off too.

The property, acquired by the family in 1871, was originally set in gardens laid out to "provide the typical charms of both the Greek and English countryside" and, as such, comes with some 40 outbuildings, stables, a swimming pool and several royal graves. Shortly after it was built outside Athens, Prince Christopher wrote that it was the only place where "we could forget that we were not supposed to be ordinary human beings." An array of old Rolls-Royces, and other paraphernalia that once belonged to Constantine before he was forced to flee into exile, can still be glimpsed on its now dilapidated premises.

The sell-off, which will include buildings in Brussels and Belgrade, Rome and Nicosia, is part of a privatisation campaign that may well be the most ambitious ever conducted on the continent of Europe. With Athens' debt load still at a whopping 166% of GDP – despite banks and hedge funds and other private creditors accepting a massive writedown in the value of their Greek holdings – the country has agreed to raise €19bn by 2015. Earlier this year, the cash-strapped culture ministry even announced it would make the Acropolis more "readily available" for photographers and film crews. Previously, the ancient site had been regarded as "too sacred' to rent out or besmirch with commercial use.

This month the conservative-led coalition, in power since June, declared that it had also pinpointed at least 40 uninhabited islands which it planned to lease out for the development of "tourism ventures".

Officials are not hiding that the drive has been spurred to great degree by the desire to placate the international lenders that are keeping the country afloat.

Since filing for its first €110bn bailout in May 2010, Greece has made almost no progress with its promise to press on with reforms. On the privatisation front, officials have invariably encountered the resistance of unions and political parties not only opposed to the arduous terms of the loan agreements but the sale of prized possessions regarded as "the family silver".

For many Greeks, the new drive is the most humiliating development yet in a process of brutal fiscal realignment that has seen poverty and unemployment hit record levels. "Foreigners have been allowed to occupy our country and now they are going to buy up our country at rock-bottom prices," Notis Marias, the parliamentary representative of the vehemently anti-bailout Independent Greeks party railed in parliament.

But government officials starting with Kostis Hadzidakis, who, as minister of development, is leading the campaign, say desperate times call for desperate measures. "We are in a war situation and we are all soldiers in civilian clothes," Hadzidakis recently averred.

With Athens's future in the eurozone still on the line – despite assurances from the EU's powerhouse, Germany, that it wants to keep the country in the bloc – Greek officials are acutely aware that time is against them. Making clear the privatisation programme is now the cornerstone of the government's economic policy, the newly installed privatisation chief this week called on investors to take up the rich pickings. Greece, he said, was set to become an El Dorado for those who did so.

Europe's family silver

The eurozone's weakest members have been selling off the family silver since the crisis began.

Portugal Raised nearly €3bn (£2.4bn) selling part of a power company to China's Three Gorges Corporation. A Chinese-Oman partnership snapped up a stake in Portugal's power and gas grid operator. Its national airline, TAP, and the post office are now up for grabs.

Ireland Hopes to raise €3bn selling off assets. Bidding for the right to run a new national lottery starts next month, and a stake in Aer Lingus is also up for grabs. It is also offering to sell parts of the country's Electricity Supply Board, and some of its forests.

Spain Hoped to raise €7bn selling a stake in the lottery, El Gordo – "the fat one", but no big bids were forthcoming. Madrid is now hoping to find buyers for various tourism sites and transport operators - and has put 100 office buildings on the block.

Italy In June, Italy agreed to sell €10bn of undefined assets, but progress is slow.