Greece must make more efforts to avoid a disorderly debt default which would cause "devastating consequences" for Greece and the rest of Europe, the top economic official of the European Union (EU) said Monday.

EU Economic and Monetary Affairs Commissioner Olli Rehn made the comments at a press conference after the Greek lawmakers late Sunday approved a tough austerity package aimed at averting a default.

CAUTIOUS WELCOME

Rehn welcomed Greek parliament's vote in favor of the the second bailout program which includes lowering the minimum wage by 22 percent and axing 150,000 public sector jobs, telling reporters that " the vote is a crucial step toward the adoption of the second program."

Rehn warned of the catastrophic effects of a disorderly default in Greece which "would be a much worse outcome with devastating consequences for Greek society," and of the knock-on effects for the rest of Europe if Greece was not granted the emergency funding.

Before the vote, Greek Prime Minister Lucas Papademos warned the 3.3-billion-euro package of cuts was "the only alternative to a catastrophic default that would force Greece, sooner or later, to leave the euro," saying that "the social cost of this package is limited in comparison with the social and economic disaster that would follow if it is not adopted."

However, Rehn said "It will still take time and effort by the Greek society" to avoid a disorderly default.

The Greek government needs come up with a further budget saving of 325 million euros (about 430 million U.S. dollars), and Greece's major political parties' leaders must make clear commitment to the reforms outlined in the bailout program, said Rehn.

He expected the two demands to be met by Wednesday when eurozone finance ministers are scheduled to meet to discuss and possibly approve the bailout program.

The 130-billion-euro bailout package, offered by the "troika," namely the International Monetary Fund (IMF), the European Union and the European Central Bank, is crucial for Greece to avoid default or a potential exit from the eurozone on March 20 when 14.5 billion euro of bonds come due.

Due to Greece's failure to implement most of the reforms agreed in the first bailout program approved in 2010, international creditors have been insisting that major political parties in the Greek coalition government make firm commitment to carry out the reforms regardless of who wins the upcoming election.

German Finance Minister Wolfgang Schaeuble told local media during the weekend that Greece needs to do its homework first before it can get the bailout loans.

"It's important to say that it cannot be a bottomless pit. That's why the Greeks have to finally close that pit. People are now starting to realize it won't work with a bottomless pit," Schaeuble said.

UNCERTAINTY REMAINS

Given the catastrophic consequences if the second bailout program doesn't come, the Greek authorities and major political parties are expected to meet the conditions raised by international creditors, experts said.

However, after the parliament vote of "yes" to the bailout plan, the political chaos and uncertainties in Athens still cast doubts over the fate of the heavily-indebted country.

Facing violent street protests in central Athens against the deeply unpopular austerity measures, the major political parties facing a general election probably due in April remains reluctant to make a written commitment to implement the "painful" austerity measures.

"So much hangs in the balance. But even if policymakers pull a deal out of the bag, there remains a clear danger that the rescue package will collapse soon after," said a note sent to Xinhua by a leading research firm Capital Economics based in London.

After all, if there is a surge in support for anti-austerity parties at the general election in April, the new government might be unable to meet the conditions of the bailout package, Capital Economic said.

Last Friday, George Karatzaferis, leader of the LAOS party, a small party in the Greek coalition government, refused to back the "tough terms" attached to the bailout program and all four cabinet members of his party submitted their resignations.

"Even if Greece accepts more austerity and structural reforms in the short term, its appetite will surely fade unless government bond yields start to fall, the banking sector begins to stabilise and economic growth returns. Such developments are a distant prospect," the note added.

However, even if the bailout program is to be approved and all austerity measures implemented, it remains to be seen whether the Greek debt burden would turn sustainable in line with the IMF's debt and financing criteria, said Capital Economics.

Citing latest official forecasts, Capital Economics said in the research note that the Greek debt-to-GDP ratio will only fall to 136 percent by 2020, falling short of the 120 percent target, from the current 160 percent, even after the private holders of the Greek bonds agreed to cut the face value of the debt by half.