The Greek cabinet on Friday approved a draft bill that would clear the way for further austerity and economic reforms that are a condition of a new €130 billion ($172 billion Cdn) bailout by the European Union and the IMF needed to avoid a disorderly default.

The prospect of more spending cuts prompted more than 15,000 people to swarm the streets of Athens, some hurling paving stones at police. Six cabinet ministers have resigned over the cuts.

Cabinet approval would mean Prime Minister Lucas Papademos could submit the bill, which would slash wages and civil service jobs and require other spending cuts, to debate in the Greek parliament on Sunday.

Earlier, Papademos promised to "do everything necessary" to ensure legislators pass the new austerity measures that would slap Greeks with a minimum wage cut during a fifth year of recession.

"It is absolutely necessary to complete the effort that began almost two years ago to consolidate public finances, restore competitiveness and economic recovery," Papademos told an emergency cabinet meeting.

Earlier Friday, European finance ministers had insisted Greece must agree to deeper cuts in wages and spending.


Demonstrators pass under a mural during protests against planned reforms by Greece's coalition government in Athens on Friday. (John Kolesidis/Reuters)

Debt-stricken Greece needs the bailout money before a €14.5 billion ($19.1 billion) bond repayment comes due on March 20.

Another condition of the bailout is that Greece strikes a debt relief deal with private investors holding Greek government bonds.

Papademos said the bailout and the private debt reduction agreement would return Greece to growth next year.

He said not getting the bailout would be a disaster.

"A disorderly default would cast our country into a catastrophic adventure. It would create conditions of uncontrollable economic chaos and social explosion," he warned.

"Greeks' standard of living in the event of a disorderly default would collapse, and the country would be swept into a deep vortex of recession, instability, unemployment and penury. These developments would lead, sooner or later, to exit from the euro."

Earlier Friday, a small right-wing party in Papademos' coalition said it would not back the new measures and four of its officials in the cabinet resigned, including the country's transport minister.

With files from The Associated Press