Greek Prime Minister Lucas Papademos says the country faces "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 affect an EU-IMF evaluation of Greece's economy later this month that will 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," Papademos warned.
"Social partners must exert a great effort in negotiations to improve competitiveness in the economy and boost employment," he said.
Greece's leading union earlier rejected calls to cut labour costs and insisted it would hold employers to existing wage agreements.
The EU, the International Monetary Fund and the European Central Bank, which first rescued Greece from bankruptcy in 2010, had already asked the government to revise wage agreements in the private sector to boost competitiveness.
The government has until now resisted such calls, fearing a huge impact on unemployment at a time when nearly 900,000 people are already jobless, according to official figures.
Merkel to meet Italian PM for talks
German Chancellor Angela Merkel will hold talks on the euro zone crisis in Berlin next week with Italian Prime Minister Mario Monti, a government spokesman said today.
Merkel will receive Monti, who took office in November, with military honours at the chancellor's office on January 11.
The spokesman said that discussions would focus on "bilateral and international issues, the situation in the euro zone as well as the economic development in Europe".
The meeting is set to follow talks between Monti and French President Nicolas Sarkozy scheduled for Paris on Friday. He is also due to travel to London to meet Prime Minister David Cameron on January 18.
Monti called last week for a "united, joint and convincing response" to the debt crisis from the European Union, stressing that recent problems for Italy on the markets were linked to wider difficulties in Europe.
Silvio Berlusconi's replacement by Monti as prime minister has helped ease fears of an imminent debt implosion as the former European Union commissioner quickly put in place a tough plan of austerity measures.
