A spokesman for Greece's private creditors says Greek Premier Lucas Papademos will soon tell eurozone finance ministers the contents of a deal to reduce the country's massive debt.

Frank Vogl said representatives of the Institute of International Finance, which has been leading the talks for private bondholders, had a "constructive meeting" with Papademos and Finace Minister Evangelos Venizelos on Tuesday night.

The fact that the Greek government will now brief the rest of the 17-nation eurozone on the deal is a sign that they believe it is now almost done. The deal aims to reduce Greece's debt by some euro100 billion ($132 billion Cdn) and is key for Greece to secure a second bailout and avoid bankruptcy.

Earlier in the day, Greece's coalition leaders once again postponed a crucial meeting on new cutbacks, despite intense international pressure for Athens to bite the austerity bullet if it wants to avoid bankruptcy.

Prime Minister Lucas Papademos' office said the meeting was now expected to be held on Wednesday.

A spokeswoman said Papademos would be meeting senior debt inspectors from Greece's bailout creditors — its representatives of the other countries that use the euro and the International Monetary Fund — late Tuesday, instead of the three leaders of his coalition backers.

The EU and the IMF insist Greece must pass further harsh austerity measures, including private sector salary cuts and civil service sackings, if it is to secure a second €130 billion ($171 billion) bailout to avoid a disastrous default next month and a potential exit from the eurozone.

Late Tuesday, the government was drafting a draft agreement of the austerity deal, a senior government official and a ranking coalition party member told the Associated Press, but gave no further details.

The impending cutbacks have angered Greek unions, who organized a general nationwide strike on Tuesday that stopped train and ferry services, while many schools and banks were closed and state hospitals worked on skeleton staff.

Riot police fired tear gas to repel hundreds of anti-austerity protesters who burned a German flag and tried to break a cordon outside Parliament, chanting "Nazis out!".

Thousands protest

Athens must placate its creditors to clinch a bailout deal from the eurozone and the IMF and avoid a March default on its bond repayments.

On Monday, Papademos' government caved in to demands to cut civil service jobs, announcing 15,000 positions would go this year, out of a total 750,000. The decision breaks a major taboo, as state jobs had been protected for more than a century to prevent political purges by governments seeking to appoint their supporters.

Among the measures the European Union and IMF are pressing Greece for is a cut in the €750 ($989) monthly minimum wage to help boost competitiveness. This reduction would have a knock-on effect in the private sector — because private companies base their salaries on the minimum wage — and even unemployment benefits.

Greece's coalition party leaders held a first key meeting on the austerity measures on Sunday, and first postponed the second round of talks on Monday by a day so Papademos could complete negotiations with EU-IMF debt inspectors.

The leaders have already agreed to cut 2012 spending by 1.5 percent of gross domestic product — about €3.3 billion ($4.35 billion) — improve competitiveness by slashing wages and non-wage costs, and re-capitalize banks without nationalizing them. The details remain to be worked out.

Creditors are also demanding spending cuts in defense, health and social security.

Unions and employers' federations alike have deplored the measures as unfair and unnecessary. Police said Tuesday that some 10,000 people took part in an otherwise peaceful union-organized march against the austerity program. A separate demonstration by about 10,000 Communist unionists ended without incident.

"They are committing a crime against the country. They are driving wage-earners into poverty and wiping out pensioners and the unemployed," said Vangelis Moutafis, a senior member of Greece's largest union, the GSEE.

"They are selling off state assets for nothing. This cannot continue. This crime must be stopped, right now."

The European Trade Union Confederation described the proposed new cutbacks as "simply not defensible."

"Greek workers and citizens have been pushed to the limit of what is acceptable in terms of restrictions," ETUC General Secretary Bernadette Segol said. "Labor law is being flouted and men and women are being crushed in the process."

Greece has been kept solvent since May 2010 by payments from a €110 billion ($145 billion) international rescue loan package. When it became clear the money would not be enough, a second bailout was decided last October.

Bondholders expected to lose 70%

As well as the austerity measures, the bailout also depends on a deal with the private bondholders.

The private investors have been locked in negotiations over swapping their current bonds for a cash payment and new bonds worth 50 per cent less than the original face value, with longer repayment terms and a lower interest rate.

Greek officials estimate private investors will take losses of about 70 per cent on the value of their bonds. Greek lenders and pension funds hold some 34 percent of the country's privately owned debt.

The EU-IMF bailout will also give the Athens €40 billion ($52 billion) to buy shares in the Greek banks, thereby protecting them from immediate collapse.

However, the bailout has to be secured for the deal with private investors to go ahead, as about €30 billion from the bailout will be used to pay investors in the bond swap deal.

A disorderly bankruptcy by Greece would likely lead to its exit from the eurozone, a situation that European officials have insisted is impossible because it would hurt other weak countries like Portugal.

But on Tuesday, the EU commissioner Neelie Kroes, in charge of the bloc's digital policies, said Greece's exit wouldn't be a disaster.

Kroes told Dutch newspaper De Volkskrant that "It's always said: if you let one nation go, or ask one to leave, the entire structure will collapse. But that is just not true."

She said Greece's austerity drive so far left much to be desired.

"This is why the troika (IMF, EU and European Central Bank) is back in Greece again, reporting for the umpteenth time that Greece is not living up to its promises: too few savings, too few reforms," Kroes said. "It's becoming a Greek mantra: 'We cannot. We won't'!"

A man begs in Athens on Tuesday. A general strike against the impending cutbacks stopped train and ferry services nationwide, while many schools and banks were closed and state hospitals worked on skeleton staff. Dimitri Messinis/Associated Press (Dimitri Messinis/Associated Press)

EU Commission President Jose Manuel Barroso quickly stepped in to counter the remarks.

"We are in a very decisive moment regarding the future of Greece and the future of the euro. We want Greece in the euro," he said.

"The costs of a default by Greece, the costs of a potential exit of Greece from the euro would be a lot higher than the costs of continuing to support Greece."

Greek Finance Minister Evangelos Venizelos acknowledged the demands on his country were tough, but on Monday called on coalition parties to work more closely together.

"To save Greece ... will involve a huge social cost and sacrifices," Venizelos said. "On the other hand, if the negotiations fail, bankruptcy will lead to even greater sacrifices."

In exchange for the first rescue loans, Greece has already imposed a raft of austerity measures meant to contain bloated budget deficits after years of profligate government spending. Pension and salary cuts were followed by increased retirement ages and drastically higher taxation — including a deeply resented new property tax that punishes nonpaying households by cutting off their electricity supply.

Even then, the 2011 budget deficit is set to exceed targets, while tax revenues are constantly lagging as Greek authorities have made little headway in fighting rampant tax evasion and inefficient tax collection.