European Commission President Jose Manuel Barroso expressed confidence that a second bailout package for Greece would be finalized next week, but said Athens needed to implement structural reforms to restore confidence in its economy.

The European Union and the International Monetary Fund have shown increasing frustration with Athens over its broken promises and weeks of wrangling over the terms of a 130 billion euro ($172 billion) bailout as time runs out to avoid a default.

Euro zone finance ministers gave a lukewarm response to Thursday's inter-party agreement from Athens on more austerity, and set more conditions for Greece to secure a second bailout needed to ensure it can meet debt repayments next month.

We are now in the final stages of a second financial assistance program for Greece, Barroso said at an EU-India summit in New Delhi on Friday.

I am confident that a solution will be reached next week as it is critical for Greece and its citizens and for the whole euro area, he said, adding that he expected Greece to stay in the euro zone.

I call on the responsibility of Greek leadership and all members of the euro zone to rapidly attain this goal, which is important not only for the euro area, but also for the global economy, Barroso said.

Finance ministers of the 17-nation euro zone meeting in Brussels warned there would be no immediate approval for the rescue package and said Athens must prove itself first.

Jean-Claude Juncker, who chairs the Eurogroup, set three conditions, saying the Greek parliament must ratify the package when it meets on Sunday and a further 325 million euros of spending reductions needed to be identified by next Wednesday, after which euro zone finance ministers would meet again.

Facing elections as soon as April, Greece's party leaders have been loath to accept the lenders' tough conditions, which are certain to be unpopular with increasingly angry voters.

Greece has fallen deeper into recession since it received a first bailout in May 2010, and Barroso said more reforms would be needed before confidence returned.

To restore competitiveness and confidence in their economy, they need to make some structural (changes), he said.

Greek Finance Minister Evangelos Venizelos left the Brussels talks quickly, telling reporters Greece faced a choice of staying in the euro or leaving.

We are confident that Greece will remain in euro zone, Barroso said. We are working with Greek friends.

(Reporting by Manoj Kumar and Nigam Prusty; Writing by Matthias Williams; Editing by Ted Kerr)

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