Strike brings services to standstill over cuts

ATHENS - Workers shut down schools, grounded flights and walked out of hospitals yesterday to protest against austerity measures brought on by the nation's staggering debt, as European leaders wrangled over whether and how to come to the country's financial rescue.

The Prime Minister headed to a European Union summit where leaders will take up the debt crisis today. Greece's financial problems have shaken the euro and underscored the interconnectedness of the global economy.

United States and European stocks rose on hopes for a rescue plan that might take pressure off other struggling eurozone countries such as Portugal and Spain, but it is unclear what wealthier EU nations will do to help Greece.

The EU's largest economies, Germany and France, are ready to offer their support to Greece at the summit but will wait to see if other countries join the effort, a French diplomatic official said.

"Here's the message: we are behind Greece," the official said. "I don't think [financial] aid needs to be extended to Greece [today]; I think a message needs to be given to markets that we will know how to resolve the Greek question."

Officials in Germany said there is no urgent need for a bailout at the moment and that "no decision on such help" is imminent. They also said EU rules prohibited them from guaranteeing another country's debts.

The head of France's national assembly, Bernard Accoyer, said that European countries must show solidarity with Greece.

"The reality is obvious to everyone. The issue is not to let Greece go bankrupt," he said.

Greece came under intense EU pressure to slash spending after it revealed a massive and previously undeclared budget shortfall last year that continues to rattle financial markets and the euro. Its deficit spiralled to more than 12 per cent of economic output - more than four times the eurozone limit - in 2009.

Prime Minister George Papandreou's new Government has announced sweeping spending cuts that will freeze salaries and new hiring, cut bonuses and stipends and increase the average retirement age by two years to 63. The Government also announced new taxes, which it insists will increase the burden on the rich but safeguard the poor.

European governments, initially reluctant to help Greece out of a crisis it created itself, now appear ready to help after market concerns intensified in recent days.

Papandreou, who was in Paris yesterday to meet French President Nicolas Sarkozy, insisted that Athens was not asking for a bailout.

"We have not asked for help," he said. "We have said that we just want you to support our will, the credibility of our country in the implementation of this programme."

Papandreou said: "We are ready to take any necessary measures to make sure the deficit goal is met."

Papandreou's Socialists came to power last October. He has faced pressure from unions, with civil servants walking off the job in the first tangible widespread backlash against the new austerity measures.

"It's a war against workers and we will answer with war, with constant struggles until this policy is overturned," said Christos Katsiotis, a union representative.

Yet turnout for demonstrations was relatively low, with fewer than 10,000 strikers and retirees braving windy, drizzly weather in Athens. Another 3000 people showed up for two rallies in Thessaloniki.

The subdued response suggests that many Greeks believe urgent action is needed to save the economy.

"It's clear that the country is on the verge of bankruptcy, and if this negative dynamic isn't controlled, we're going to pay a huge social and financial price," said political analyst and publisher Giorgos Kyrtsos.

One weekend newspaper survey showed 70 per cent of Greeks backed Papandreou's call to cut the pay and perks of the country's roughly 27,000 civil servants, although they opposed measures that would affect them individually such as new taxes or a higher retirement age.

Crisis in numbers

700,000
Civil servants in the Greek central government, with another 300,000 nationwide. The country has a total population of 11.2 million.

12.7 per cent
Estimate of budget deficit last year, four times what Eurozone rules allow.

$56b
Previous government's estimated payments as part of banking system bailout in 2008.

$580b
The estimated total national debt, or about 113 per cent of GDP - the highest in Europe except Italy.

- AP