Clashes as Greeks protest at cuts

A petrol bomb explodes near riot police during protests in Athens today (Reuters)

Thousands have taken to the streets of Athens as unions launched a two-day general strike against planned austerity measures.

Thousands of people marched through the streets to protest at the cuts, which include a 22% drop in the minimum wage at time when the unemployment rate is over 20 % and the economy is in a fifth year of recession. Clashes broke out, with demonstrators hurling fire bombs at riot police shooting tear gas.

In central Athens, clashes erupted outside Parliament between dozens of hooded youths and police in riot gear. Police said eight officers and two members of the public were injured, while six suspected rioters were arrested.

The violence broke out as thousands took to the streets of the capital after unions launched a two-day general strike against the planned austerity measures.

Police said some 7,000 people took part in the demonstration. Another 10,000 Communist supporters held a separate, peaceful march.

Scores of youths, in hoods and gas masks, used sledge hammers to smash up marble paving stones in Athens' main Syntagma Square before hurling the rubble at riot police.

The country's two biggest labour unions stopped railway, ferry and public transport schedules, and hospitals worked on skeleton staff while most public services were disrupted.

The harsh measures follow two years of severe income losses, repeated tax hikes and retirement age increases that failed to materially improve the country's finances.

Greece's future in the euro grew increasingly precarious as violence erupted on the streets of Athens during a general strike and five politicians resigned from the government after European leaders demanded deeper spending cuts.

Hours after Greece claimed it had reached an agreement among its squabbling party leaders on new cutbacks, European officials dashed any hopes that the country was close to getting its bailout. Finance ministers said more austerity needs to be agreed and set a deadline for the middle of next week.

If Greece's government fails to meet Europe's demands, the debt-ridden country faces a chaotic debt default next month that would send shockwaves around the world economy and could doom a generation of Greeks to even deeper hardship.

If it does deliver those demands, Europe has committed to give it a 130 billion (£109 billion) lifeline that would at least postpone Greece's day of reckoning.

"No disbursement without implementation," Jean-Claude Juncker, the Luxembourg premier who also chairs the eurozone's finance ministers' meetings, said after they declined to fully back the deal Greek leaders had agreed.

The eurozone finance ministers want Greece to find another 325 million euro (£272 million) in savings and say Parliament must vote the austerity through. They also requested that the party heads commit to the measures even after general elections in April.

Resistance was also growing in Athens' halls of power, with six members of the 48-strong Cabinet leaving the government over the past two days because they could not agree to the new demands.

The five were Deputy Foreign Minister Mariliza Xenogiannakopoulou, of the majority Socialists, the transport minister and the deputy ministers of defence, merchant marine and agriculture - all members of the rightist LAOS party, a junior coalition member. On Thursday, Deputy Labour Minister Yiannis Koutsoukos, a Socialist, also quit.

"They are trying to impose measures that will make the recession worse and drive the country to despair," Xenogiannakopoulou said in a letter, adding that she would vote against the cutbacks in parliament.

LAOS leader George Karatzaferis said he was withdrawing support for the measures agreed a day earlier, describing the country's treatment by its European partners as "humiliating."

Though LAOS is a small party, its action underscores the growing discontent, both among political leaders and households - nearly one in two young people are out of work.

LAOS has 16 deputies in the 300-seat parliament in a coalition backed by 252 lawmakers, posing no direct threat to the measures that are due to be voted on late on Sunday and backed by the two major coalition parties, the Socialists and conservatives.

The uncertainty hit global markets, as shares on the Athens Stock Exchange plunged 4.6 and the euro sank 0.7 % to 1.3180 dollars.

As well as trying to secure the bailout, Greece is close to concluding a related debt-relief agreement with banks that would slash 100 billion (£84 billion) from the country's national debt.

In return for the promised debt relief, Prime Minister Papademos and heads of the three parties backing his government - including Karatzaferis - have already agreed to demands to fire 15,000 civil servants in 2012, slash the minimum wage and significant reductions in health, social security and military spending.

Karatzaferis insisted it was not his intention to withdraw from the government, and urged other countries in the European Union to challenge what he described as Germany's domination of the union.

"Of course we do not want to be outside the EU, but we can get by without being under the German jackboot," he told a news conference. "Like all Greeks, I am very irritated ... by this humiliation."

In a televised address, Mr Papademos said senior members of his government would be expelled if they oppose the austerity programme.

AP