ECB's Mersch says Greek default would bring "chaos"

BASEL, Switzerland (Reuters) - European Central Bank Governing Council member Yves Mersch said on Saturday a Greek sovereign debt default would lead to chaos, adding it was up to the parliament to deliver on its austerity promises.

Banks and policymakers moved closer to a deal on Friday to help Athens secure funds ahead of a parliamentary vote on austerity next week that Greek Prime Minister George Papandreou must win to avert default.

If the vote next week is lost, international lenders are unlikely to release a 12 billion euros funding tranche, meaning the government will run out of cash within days.

"Now it's up to the Greek parliament. I observe," he told reporters on the sidelines of the Bank for International Settlements annual meeting in Basel.

"The next step will be to observe whether there will be delivery."

Euro zone finance ministers will decide on July 3 on the second bailout package, which is crucial to prevent Greece from defaulting on debt that matures in mid-July.

When he asked about what would happen if Greece defaulted, Mersch said: "Chaos."

Mersch, who is the head of Luxembourg's central bank, also criticized Europe's decision-making process on handling the debt crisis.

"There are too many conflicting interest around the table... It does not create a very conducive environment for common decision making," he said.

(Reporting by Natsuko Waki; Editing by Toby Chopra)