Greece faces uncontrolled default without labour cost cuts

Prime Minister Lucas Papademos has said Greece faced an "uncontrolled default" in March unless unions and employers can quickly agree on labour cost cuts to boost competitiveness.

At a round of meetings with social partners, Papademos said the labour issue would be key to an EU-IMF evaluation of Greece's economy later this month and determine the conclusion of a debt-saving agreement for the country.

"Without the agreement and the funding linked to it, Greece faces an immediate danger of uncontrolled default in March," he warned yesterday.

"Social partners must exert a great effort in negotiations to improve competitiveness in the economy and boost employment.

"We can not expect other EU states and international organisations to continue to fund a country that does not adapt to reality and does not deal with its problems," Papademos said in a statement issued by his office.

"Our actions and decisions in the coming weeks will decide everything," the he said, calling for a conclusion to labour talks by the end of January.

Greece, first bailed out in May 2010 by the EU and IMF, is the epicentre of a debt crisis, which has also claimed Ireland and Portugal and now threatens Italy and Spain, destabilising the whole eurozone.

There has been continuous speculation since 2010 that it could default, prompting the EU to agree a larger bailout package in October, whose workings still need to be nailed down for Athens to get the urgently needed funds.

An uncontrolled default is especially feared, because it could set off a chain reaction, dragging down other weak eurozone member states and threatening the whole euro system as a result.

France and Germany have led efforts to tame the crisis, driving the eurozone to adopt tough austerity conditions as governments try to stabilise their strained finances and Papademos highlighted the wider danger.

"Our decisions and actions will not only determine the country's ability to return to a viable stabilisation course but our very future in the euro," he said.