If Rangers power past the Greek giants they will face either Werder Bremen or Braga in the next round - the stage at which their European campaign ended against Osasuna last season.

Smith warned his squad to prepare for a "very hostile atmosphere" in Athens against opponents who beat Aberdeen 3-0 in the Greek capital in October.

But he is convinced his squad is set up to reach the last eight - at least.

Rangers tumbled into the UEFA Cup after their disappointing Champions League exit, but initial despondency in the camp has been replaced by growing anticipation for another European campaign.

Smith now wants his players to show they want success in the competition, which might be considered their consolation prize after missing out in Europe's elite competition.

"Everyone asks me of the squad - how are they?" said Smith.

"We're coming to a period of the season where that is what they've got to prove, more than anything else.

"It's the same thing in the UEFA Cup.

"They'll have to show that they can handle it maybe a little bit better (than last season).

"We managed to get through that round last year, and went on to play Osasuna in the next round - so I hope we can go a little bit further this season."

Rangers will be at home for the first leg of their tie with Panathinaikos, which the manager admits is not ideal.

Smith said: "It's a difficult one, in the sense that going away to any of the Greek teams is always going to be difficult.

"There's always a very hostile atmosphere in the matches.

"They are always a good standard of team. We've already seen that when they played Aberdeen - so it'll be a tough enough draw."

The first leg at Ibrox will not take place until February 13 or 14, with the trip to Greece scheduled for February 21.

"It seems a long way away," said Smith.

"We've got an awful lot of games to play before going to play that game. But I think once it comes around everyone will look forward to it, and look forward to trying to get a run in the UEFA Cup.

"We've got the home game first, and then have to go away - and I would always more preferably have it the other way around.

"We'll just try to handle that the best we can."

Smith did some early business before the transfer window by securing the future of Nacho Novo, who has signed a new contract.

The Spanish striker, who joined in 2004 from Dundee, had been linked with clubs including Crystal Palace - and his Rangers stay was due to expire next summer.

But the 28-year-old agreed to stay on for a further two seasons, and Smith is convinced it will prove an astute deal for his club.

"He wants to play for Rangers; he wants to stay; he's popular with everyone here," added the manager.

"I'm delighted to have him for the next couple of years anyway. He's always contributed since I came here. He's got a terrific attitude."

Rangers travel to their fellow UEFA Cup contenders Aberdeen on Sunday, looking to maintain their strong challenge to Celtic at the top of the Clydesdale Bank Premier League.

"I think the UEFA Cup is in the background just now," Smith said.

"I think the Champions League would be in the background as well.

"It's the first time in the season that the full focus can be placed on your league games, your Scottish Cup games.

"You start to look towards your domestic situation more than European. We started the qualifying games for the Champions League on the Wednesday before the league season started.

"So we've had a lot of focus on Europe - and we've tried hard to make sure it doesn't affect us too much. We've been disappointed on a few occasions about the way we've played in the league.

"So it's the first time in the season we can look domestically, and for the next six to eight weeks or so there must be a full focus on making sure that our challenge for the championship is a strong one."