* Panel suggests merging pension funds, setting up buffer
* Protesters block entrance to labour ministry
* Parliament debates reforms' bill ahead of bailout review (Recasts with pension system viability report)
By Angeliki Koutantou and Lefteris Papadimas
ATHENS, Oct 15 (Reuters) - Greece must crack down on undeclared work, create more jobs, merge its pension funds and unify contribution rates to revamp its ailing pension system, a committee set up to find ways to make the system viable said on Thursday.
The report had been due to be presented at the labour ministry but was moved to parliament after about 200 people protesting against a first set of pension reforms on which lawmakers will vote by Friday blocked the ministry's entrance.
Athens needs to pass the legislation to complete its first bailout review and qualify for the next instalment of a 86 billion euro ($98.14 billion) bailout that is keeping the state afloat.
Greece has promised its international lenders a comprehensive pension reform plan by December. But Prime Minister Alexis Tsipras' government faces resistance to changes from a country worn down by six years of recession and austerity.
In making its proposals, which aim to make the system viable up to 2050, the committee of experts took into account demographics and the deterioration in employment and income during years of crisis that shrank the economy by a quarter.
"The current situation is dramatic. The system is not viable but in addition, it has become non-credible due to the across-the-board cuts that have been imposed since 2010," the committee's president Athena Petroglou told reporters.
Greece has made several failed attempts to overhaul its pension system, most recently in 2010. Failing to pursue reforms and raise revenues during the crisis, it imposed several waves of deep pension cuts.
Labour Minister George Katrougkalos said the panel's report was not binding but would be the basis for consultation with social partners, and that a draft bill would be ready in November.
The panel urged tighter cooperation between political parties to achieve the much-needed reform. It also said the state must find ways to stop people retiring early.
It proposes that a buffer fund be set up, to be financed by the budget, pension funds and other resources such as a wealth tax or a levy on bank transactions. Its funding needs will be determined through actuarial studies.
Later on Thursday and on Friday, parliament will vote on a bill which gradually raises the retirement age to 67 years by 2022 and cuts pensions by 10 percent for people below that age who have retired but have yet to reach 67.
Outside the labour ministry, protesters from communist-affiliated party PAME hung out a huge banner reading: "We won't become slaves of the 21st century".
"They want us to work until we get very old, without pensions and with no access to health and security," PAME said. "We should not let them destroy social security."
PAME and public sector union ADEDY will hold a rally in Athens outside parliament on Friday.
Tsipras' left-wing government on Wednesday suspended plans to increase tax on rental incomes after a public outcry, saying it was still negotiating with international lenders on reforms ahead of the vote. ($1 = 0.8763 euros) (Writing by Renee Maltezou; Editing by Catherine Evans)