Anger mounts over Greece's austerity plan

Hundreds of youths rioted in Athens, throwing Molotov cocktails and stones during a large May Day rally against austerity measures planned by the near-bankrupt Greek government.

Protesters clash with police at May Day rally

Police detained protesters in Athens on Saturday. ((Alkis Konstantinidis/Associated Press) )
Hundreds of youths rioted in Athens on Saturday, throwing Molotov cocktails and stones at police who responded with tear gas at a large May Day rally against austerity measures needed to secure loans for near-bankrupt Greece.

Responding to calls from the country's two main labour unions, several thousand people marched in major cities against anticipated spending cuts and consumer tax hikes.

In Athens, groups of black-clad anarchists in hoods and motorcycle helmets left the main demonstration and burned a TV van, smashed shop windows and set up barricades of flaming trash bins.

Some 17,000 people took part in the march, according to police estimates.

Police said 10 suspected rioters were arrested, while no severe injuries were reported.

IMF seeks cuts in exchange for loans

The government is set to announce more sweeping spending cuts through 2012 to win support for an international loan package worth $60 billion this year alone.

The cabinet was to meet Sunday morning to finalize the measures, with Finance Minister George Papaconstantinou expected to announce them at noon and then immediately fly to Brussels for an emergency meeting of eurozone finance ministers.

The International Monetary Fund has said it will provide the money over three years, along with Greece's partners in the group of countries using the euro common currency. Talks with IMF and EU negotiators began in Athens on April 21 and continued through Friday.

French Finance Minister Christine Lagarde said Saturday that she was confident eurozone finance ministers would approve the package by the end of the weekend. Governments are discussing a package worth up to $159 billion over three years, she said.

Greece's additional austerity measures are likely to include raising consumer taxes while docking pensions and public service pay. Unions are furious.

"These measures are death," said Nikos Diamantopoulos, participating in a rally organized by unions. "How people are going to live tomorrow, how they're going to survive, I do not understand."

Union members held a peaceful march to the Athens offices of the European Union and on to the U.S. Embassy.

In the northern Greek city of Thessaloniki, where more than 5,000 people demonstrated, anarchists briefly clashed with police and smashed a few storefronts and bank machines.

Conservative opposition party New Democracy and the right-wing populist LAOS have been critical of the government but are seen as likely to support the package of measures. Left-wing parties have vowed to escalate protests.

"The Greek people do not owe anything to anybody," Left coalition leader Alexis Tsipras told reporters at one of the Athens rallies, assailing "those who have brazenly robbed public money and pension funds."

Virginia Kalapotharakou, an accountant who joined striking seamen and dockworkers rallying in the port of Piraeus, called the potential measures "very reactionary."

"They're trying to do away with all the rights we gained through struggles in previous years," she said.

Euro ripple effect feared

A debt default would be a serious blow to the euro currency and could ravage Greek and European banks that invested in Greek government bonds. The bailout is designed to prevent that and to keep the Greek crisis from spreading to other countries that use the euro.

German Chancellor Angela Merkel said Berlin is pushing for changes to the rules governing the eurozone, including the possibility of suspending voting rights for nations that do not uphold their commitments.

Merkel told the Bild am Sonntag weekly in comments released Saturday that European Union finance ministers would meet in May to discuss changes to the bylaws for the 16-nation eurozone.

The chancellor said the common currency has been one of the greatest European success stories but changes are needed to ensure its stability.

Greece spent freely for years and ran up public debts equal to 115 per cent of the country's total annual economic output. It has been effectively shut out of bond markets to refinance its debt pile because investors fear default and are demanding high rates of interest the government says it cannot pay.

Signs that help would soon be approved have calmed markets, which previously pushed Greece's cost of borrowing to untenably high levels as EU and German officials showed little urgency in addressing the problem. On Friday the interest rate gap between Greek 10-year bonds and their German equivalent narrowed to 6.20 percentage points, from a staggering 10-point spread on Wednesday.

Banks downgraded

But Athens was in for more bad news as credit agency Moody's Investors Service downgraded the debt rating of nine Greek banks: National Bank of Greece, EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank, Emporiki Bank of Greece, Agricultural Bank of Greece, General Bank of Greece, Marfin Egnatia Bank and Attica Bank. Moody's said the banks might face further downgrades — alongside an ongoing review of the country's sovereign debt rating.

The agency said Thursday it was waiting to see details of the EU-IMF rescue package, but a "multi-notch downgrade" of Greece's credit rating remained likely.