The Ibrox side had looked set to progress to the third qualifying round of the Champions League with an away-goals win over FBK Kaunas in Lithuania.

The first leg in Glasgow had ended in a goalless draw but Kevin Thomson opened the scoring in tonight's clash, before Nerijus Radzius levelled for the hosts.

Rangers were then hit with a sucker punch when Linas Pilibaitis snatched a late winner with only three minutes to go.

Smith said: "It's a blow in every aspect, including the financial side and everything that comes with it.

"We just have to face it and get on with it. We have a job on our hands to pick everyone up.

"There was always a hope that we could pick ourselves up for this game and there was also a matter of pride of playing in Europe again.

"We enjoyed the run we had last season but we are not going to get one this season and that's a disappointment for us."

Last season's epic run to the UEFA Cup final was seen as one of the causes for Rangers slipping up in the title race on the last day of the season but Smith admits he cannot yet contemplate any positives that may come out of tonight's shattering blow.

He added: "The championship is a long way off after a night like tonight. I've got enough problems picking everyone up for Falkirk on Saturday."

Rangers have had their fair share of injury problems already, with skipper Barry Ferguson out for up to four months following ankle surgery and Carlos Cuellar missing both games against Kaunas with a calf strain.

But Smith insisted: "You can use all the excuses you want but there should have been enough left in the team to handle this.

"No disrespect to Kaunas, they set their stall out well in both games, and there are things we just have to take on board. It's a huge disappointment for everyone."

Asked whether he needs to plunder the transfer market again and strengthen his squad further, Smith said: "As things look at the moment, I would say yes but we just have to sit down in the morning and see what happens."

Kaunas coach Jose Couceiro believed Rangers were still strong favourites to win the tie ahead of tonight's match but admitted his players were always quietly confident after last week's stalemate at Ibrox.

He said: "That was the first time my players had played in Glasgow with an atmosphere like the one at Ibrox.

"The first leg for us was the dangerous one because we don't have 40,000 supporters. We wanted a good result and 0-0 was a good result for us.

"The team always believed it was possible in their home park. But Rangers were still the favourites before this match.

"They are a very strong team and Kaunas are a small club. Our championship is not a very strong championship - it's very different from Scotland.

"I must congratulate my players because they have worked fantastically for the last few weeks."