Greece's state sector shut down Thursday as civil servants walked off the job in a 24-hour strike, demanding the government take back stringent austerity measures designed to pull the country out of a debt crisis.

Greece's state sector shut down Thursday as civil servants walked off the job in a 24-hour strike, demanding the government take back stringent austerity measures designed to pull the country out of a debt crisis. (Thanassis Stavrakis/Associated Press)

Tax and customs offices, municipalities, schools and universities were closed, while state-run hospitals were functioning on emergency staff as doctors walked off the job for the day.

Flights were to be grounded for four hours Thursday afternoon as air traffic controllers joined in the protests with a work stoppage. Greece's two main airlines, Olympic Air and Aegean, cancelled or changed the times of dozens of other flights during the day because of the strike.

Greece narrowly avoided defaulting on its debts in May after the International Monetary Fund and other European Union countries using the euro granted it rescue loans under a three-year, $152 billion US package. In return, the government has imposed austerity measures that included trimming pensions, cutting civil servants' salaries and increasing taxes.

Unions and many businesses have complained that the measures are stifling the economy, leading to layoffs and the closure of hundreds of small businesses squeezed between higher taxes and consumers' reduced purchasing abilities.

"Every day that goes by, it becomes clear that this policy by the government, the IMF and the EU, which leads workers and society to poverty and misery, is also a dead end for the economy," said the main civil servants' union, ADEDY.

The government predicts in its 2011 draft budget that unemployment will jump from this year's projected 11.6 per cent to 14.5 per cent in 2011 and 15 per cent the following year.

Labour unions have carried out a series of strikes and demonstrations this year against the austerity plan.

The government insists it has no choice but to implement the measures, which aim to overhaul the country's ailing economy and have also included reforms to Greece's fractured and ailing pension system.

Deficit reduction pledged

Hundreds of civil servants gathered in central Athens for protest rallies, with demonstrators expected to march to the nearby Parliament building.

The government has pledged to reduce its budget deficit to 7 per cent of gross domestic product by the end of next year — lower than the IMF and EU target of 7.8 per cent required under the rescue package — from the current 2009 figure of 13.6 per cent.

The EU has said it will revise its figures for Greece's debt and deficit upwards for the years 2006-2009, but it was not clear by how much. In April, the EU statistics agency Eurostat had said the deficit could be further revised by up to 0.5 percentage points.

"Will it be very significant or will it be moderate, I can't say that today," European Commission spokesman Amadeu Altafaj said in Brussels Wednesday. "But there will be a net correction upwards" of the debt and deficit figures.

Prime Minister George Papandreou, speaking to his party deputies in Parliament Thursday morning, indicated that the final 2009 deficit figure could be near 15 per cent.

The conservative administration, from which he took power in elections last October, "increased the real deficit to near 15 per cent from 3 per cent that (the conservatives) said it was at the start of 2009," Papandreou said.

He echoed statements made earlier this week by his finance minister, George Papaconstantinou, in insisting that the revisions would not affect the deficit reduction targets, and that no new austerity measures would be taken.

"Despite Eurostat's new revisions, we will both meet the deficit targets we have set for this year, and we won't need to take measures that will further burden the Greek citizen," Papandreou said.

The government has also been on a charm offensive to persuade wary markets that Greece is a safe investment. Papaconstantinou was in New York Thursday to meet international investors, before heading to Washington DC to attend an IMF meeting Friday.