The savage cuts to Greece's health service budget have led to a sharp rise in HIV/Aids and malaria in the beleaguered nation, said a leading aid organisation on Thursday.

The incidence of HIV/Aids among intravenous drug users in central Athens soared by 1,250% in the first 10 months of 2011 compared with the same period the previous year, according to the head of Médecins sans Frontières Greece, while malaria is becoming endemic in the south for the first time since the rule of the colonels, which ended in the 1970s.

Reveka Papadopoulos said that following health service cuts, including heavy job losses and a 40% reduction in funding for hospitals, Greek social services were "under very severe strain, if not in a state of breakdown. What we are seeing are very clear indicators of a system that cannot cope". The heavy, horizontal and "blind" budget cuts coincided last year with a 24% increase in demand for hospital services, she said, "largely because people could simply no longer afford private healthcare. The entire system is deteriorating".

The warning came as the IMF approved its €28bn (£23bn) share of Greece's latest €130bn bailout which it needs to meet its debts and maintain social services.

The head of the EU's taskforce to Greece, the German eurocrat Horst Reichenbach, gave a press conference in which he said the country's public administration would be overhauled by a team of experts. However, he said the bailout and last week's agreement on debt restructuring gave Greece the chance for a "new start".

MSF Greece said the extraordinary increase in HIV/Aids among drug users was largely due to the suspension or cancellation of free needle exchange programmes. "We are also seeing transmission between mother and child for the first time in Greece," Papadopoulos said. "This is something we are used to seeing in sub-Saharan Africa, not Europe.

"There has also been a sharp increase in cases of tuberculosis in the immigrant population, cases of Nile fever – leading to 35 deaths in 2010 – and the reappearance of endemic malaria in several parts of Greece."

According to Papadopoulos, such sharp increases in communicable diseases are indicative of a system nearing breakdown. "The simple fact of the reappearance of malaria, with 100-odd cases in southern Greece last year and 20 to 30 more elsewhere, shows barriers to healthcare access have risen," she said.

"Malaria is treatable, it shouldn't spread if the system is working."

MSF has been active in Greece for more than 20 years, but until now has largely confined its activities to emergency interventions after natural disasters such as earthquakes, and providing care to the most vulnerable groups in the community, including immigrants.

It is now focusing on supporting the public health sector, providing emergency care in shelters for the homeless and improving the overall response to communicable diseases. Papadopoulos, who spent 17 years abroad with MSF and returned to her native Greece three years ago, sees hope among the rubble. "What keeps me going is an increasingly strong sense of solidarity among the Greek people," she said. "Donations to MSF, for example, have of course gone down with the crisis, but donors keep giving, they remain active."

She sees a refreshing new phenomenon of self-organisation and social action. "In the past year of this crisis I have seen really encouraging, really exciting things happening – people are seeing the power of organising themselves. We have to support them."