Greek public workers strike against austerity drive

Thousands of Greek civil servants went on strike yesterday against wage cuts, paralysing flights and disrupting rail traffic as Athens grappled to fight a debt crisis that has shaken Europe.

The day-long strike came as Greek Prime Minister George Papandreou flew to Paris for talks with French leaders amid reports that Germany is considering how to help Athens and contain aftershocks on the rest of the eurozone.

The strike action, which is set to cripple the work of ministries, local administrations, educational institutions and tax offices, will be another test of the resolve of Greece's Socialist government.

Hundreds of protesters gathered in Athens yesterday for separate demonstrations called by civil servants and Communist workers.

They waved banners proclaiming: "The plutocracy should pay for the crisis," and specifically targeted "bankers, ship owners and big business."

Flights across Greece were suspended yesterday as air traffic controllers joined the protest. The two main Greek carriers, Olympic Air and Aegean, cancelled flights for the day.

The main union of public workers, which alone counts some 300,000 members, will stage a protests in the second city of Salonika against the "unjust and meaningless sacrifices" called by the government.

The state-run railways cut services following a nine-hour walkout announcement by unions but international train traffic will not be affected.

Since the government revealed late last year that the country's finances were in much worse shape than had been thought, the markets have punished Greece as they fear unions will beat back any cost-cutting plans.

Greek Prime Minister George Papandreou on Monday asked civil servants to accept bonus cuts saying they "must be the first to set an example."

The Greek crisis has driven up borrowing costs for governments across Europe, with pressure mounting on a number of other heavily-indebted eurozone members, and sent the euro sliding against the dollar.

The European Commission voiced concern on Tuesday that Greece's fiscal crisis could affect other parts of the 16-nation eurozone.

There is a "serious risk of spill-over into other parts of the euro area," EU Economic Affairs Commissioner Joaquin Almunia told the European Parliament in Strasbourg.

A report in the Financial Times Deutschland yesterday suggested that Germany was preparing an aid plan for Greece, following weeks of speculation that eurozone nations may need to help Athens to avoid a humiliating turn to the IMF that would shatter confidence in the euro.

The newspaper said German Finance Minister Wolfgang Schaeuble was working on both a bilateral basis and at the European level on putting together a lifeline package.

Greek stocks yesterday jumped 4.23 per cent in early morning trading.

Athens on Tuesday pressed on with efforts to slash expenditure and raise revenue to narrow its 12.7 per cent deficit - more than four times the eurozone limit of three per cent of gross domestic product.

Labour Minister Andreas Loverdos announced a two-year hike in the average retirement age to 63 years by 2015 while other ministers met for a second day to finalise the country's new tax policy.

The European Commission last month rubber-stamped a three-year Greek crisis plan presented by the government.

But the government is to face opposition over its plans from workers, with Greece's main private sector union GSEE to stage a nationwide strike on February 24 in opposition to the pension reform.