ATHENS (AFP) ― Prime Minister Lucas Papademos on Wednesday said Greece faced an “uncontrolled default” in March unless unions and employers can quickly agree on labor cost cuts to boost competitiveness.

At a round of meetings with social partners, Papademos said the labor 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.

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

“We cannot expect other EU states and international organizations 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 labor talks by the end of January.

Greece, first bailed out in May 2010 by the EU and IMF, is the epicenter of a debt crisis which has also claimed Ireland and Portugal and now threatens Italy and Spain, destabilizing 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 stabilize 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 stabilization course but our very future in the euro,” he said.

Greece’s leading union earlier Wednesday rejected calls to cut labor costs and insisted it would hold employers to existing wage agreements.

“We are not prepared to retreat even a single step on safety salaries for poor workers ... we have signed an agreement, we call on (employers) to honor their signature,” said Yiannis Panagopoulos, head of the main private sector union GSEE.

The EU, IMF and the European Central Bank have already asked the government to revise private sector wage agreements to boost competitiveness in reforms set out under the first bailout accord.

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.

But Papademos on Wednesday said Greece’s creditors had again raised “a series” of labor-related issues for revision, including the minimum wage ― at just over 750 euros per month ― holiday bonuses and indexed pay rises.

“If we do not make important steps, if we do not make a good impression, the evaluation of our peers will not be positive,” he said.

“Tomorrow we risk being left with nothing.”

Papademos took over in November as head of a temporary coalition government tasked with finalizing the October accord which includes a 50-percent rollover of Greek sovereign debt in agreement with private creditor banks.

The October bailout also provides 130 billion euros ($169 billion) in direct aid, of which 30 billion euros will be used to recapitalise Greek banks to cover their losses resulting from the bond write-down.

Greece hopes to draw 89 billion euros from the new package by February for its debt repayment needs and the bank recapitalization process.

“The Greek economy has sustained a 25-percent loss of competitiveness in relation to the more competitive eurozone countries in the decade after the introduction of the euro,” Papademos said.

“We must accept a short-term income reduction ... we will have to accept limited sacrifices to avert a disastrous outcome.”