The European Commission extends its backing to Greece's austerity plan on Wednesday but reveals that Athens must take further measures and adjustments to reduce public sector wages in order to deal with the most severe debt crisis in the euro zone.

The EC said: "The Commission recommends... that Greece adopts a comprehensive structural reform package aimed at increasing the effectiveness of the public administration, stepping up pension and healthcare reform, improving labor market functioning and the effectiveness of the wage bargaining system."

The European Union executive ordered Athens to submit an interim report on progress in reducing its huge deficit by mid-March.

In addition, it revealed its plan to cut the budget gap from 12.7 percent of gross domestic product (GDP) in 2009 to below 3 percent in 2012 would not be easy to implement, and Greece must be ready to make further deep fiscal adjustments.

Spain on Wednesday revealed that it had reiterated its budget deficit expectations for the next three years and now hopes its deficit to total 9.8 percent of GDP in 2010, 7.5 percent in 2011 and 5.3 percent in 2012 -- augurs that are 1.7 to 2.3 percentage points above previous forecasts.

The last month austerity programme, includes welfare spending cuts, tax hikes, non-replacement of departing civil servants and cuts in top-up wages for higher earners in the public sector.