By Renee Maltezou and Lefteris Papadimas
ATHENS (Reuters) - Thousands of Greek public sector workers marched in Athens on Tuesday to protest new austerity measures in the first big test of government resolve in pushing through deep budget cuts in exchange for a record EU/IMF rescue.
Prime Minister George Papandreou's government submitted its three-year austerity bill to parliament, where it enjoys a comfortable majority. The plans call for spending cutbacks and tax rises totaling 30 billion euros and are expected to be approved on Thursday.
Around 4,000 protesters, including teachers, garbage collectors, pensioners, construction workers and civil servants, demonstrated in front of parliament, chanting, "Never! We will never pay for the EU and IMF." Police fired teargas at a small group that pelted them with rocks and bottles.
The turnout was well below the tens of thousands that joined protests earlier this year against austerity plans and lacked the fervor of riots that paralyzed Athens in December 2008 following the killing of a teenager by police.
But unions promised bigger crowds on Wednesday, when private sector workers will join the 48-hour public sector walkout.
"The demonstration today didn't seem very big or feisty," said Theodore Couloumbis, deputy head of Athens-based think tank ELIAMEP. "We should wait till tomorrow to see whether these protests are symbolic or a sign that reaction will escalate."
Government ministries, tax offices, schools and hospitals shut for the rally and 118 domestic flights were canceled. All flights will be grounded on Wednesday and the country could grind to a virtual halt in the third joint public-private sector walkout since the start of the year.
"Once we heard about the measures we shivered with fear for our future," said Yannis Mavrelis, a 53-year-old teacher who was among the protesters.
Chryssa Hardella, 56, another teacher, said she had spent 30 years building up her income only to see it disappear overnight. "I'm begging them not to take my earnings," she said.
Ilias Iliopoulos, general secretary of the main public sector union ADEDY, told Reuters that more strikes were planned for later in the month.
In exchange for the draconian new cuts, Athens is to receive 110 billion euros ($146.5 billion) in support over three years from the European Union and International Monetary Fund.
The package was designed to calm fears of a default and buy the country time to overhaul an economy that is uncompetitive and plagued by corruption.
But markets fell sharply on Tuesday, reflecting deep concerns about whether the deal can really solve Greece's woes and prevent them from spreading to other euro zone members.
The euro slid to a one-year low against the dollar while the spreads between Greek bond yields and benchmark German Bunds shot toward 700 basis points. Greek bank stocks plunged over 10 percent.
"We are in a difficult position," Labour Minister Andreas Loverdos said at a presentation of the government's pension reform plans. "I want to assure you that regardless of the reactions or harsh accusations, our aim is to save Greece and we will stick to it."
Greek newspaper editorials are warning the government not to make average workers and pensioners pay the price for sins of corrupt officials and tax evaders who are seen by many as the main culprits in Greece's dire financial state.
The government plans foresee a public sector pay freeze through 2013 and big cuts in treasured holiday bonuses and allowances that account for a substantial portion of civil servant incomes.
The government announced on Tuesday it had hired Lazard to provide it with financial advice, but denied that the investment bank had been brought on to work on a restructuring of its debt as it did for Argentina and other countries.
"Any form of debt restructuring is out of the question," Greek Finance Minister George Papaconstantinou told Reuters after news of the Lazard hire. "No one has been hired to advise us in this regard."
A restructuring or rescheduling would be an embarrassment for the government and could haunt sentiment toward its debt for years. But some economists believe it may give Athens the best shot at repairing its economy and broken finances.