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Protesters hold up posters denouncing Greece's high military spending during a demonstration in central Athens on Thursday. ((Petros Giannakouris/Associated Press))

Calm returned on Friday to the streets of Athens after strikes and protests against the government's new austerity measures wracked the capital of Greece on Thursday.

The debt-ridden country is under intense pressure from both the financial markets and the European Union to reduce its deficit from 12.7 per cent of economic output in 2009 to 8.7 per cent this year.

Last week, Greece introduced a second harsh $6.5-billion US austerity package that cut civil servants' wages, froze pensions and raised consumer taxes.

The new cutbacks, added to a previous $15.24-billion austerity plan, sparked a wave of strikes and protests from labour unions whose reaction to the initial raft of measures had been muted.

Thursday's 24-hour general strike, the second in a week, grounded airline flights, halted public transport, suspended news broadcasts and left hospitals working with emergency staff.

These services were mostly resumed by Friday.

Clashes between riot police and rock-throwing, masked youths broke out during Thursday's demonstration in central Athens by tens of thousands of striking workers.

An unofficial police estimate put the Athens crowd at about 20,000; organizers said the actual number was much higher.

City services resume

The clashes broke out soon after the march began, with riot police firing tear gas and stun grenades to disperse masked youths who smashed pavement, marble steps and building facades to use as projectiles to throw at police.

Speaking on Friday morning, Athens resident Katerina said she felt nothing would be achieved by demonstrating, while local man Yannis said that although he had joined in the demonstrations and would do so again, he could not see any results from the protests.

While public anger has grown, it has been mitigated, by a general understanding, that something must be done to pull the country out of a crisis.

The government says the cuts are its only way to dig Greece out of a crisis that has undermined the euro, alarmed international markets and inflated the loan-dependent country's borrowing costs.

But unions say ordinary Greeks are being forced to pay a disproportionate price for past fiscal mismanagement.

Greek Prime Minister George Papandreou, who has been on a four-nation tour to drum up support for his austerity package, told Greek reporters in Washington earlier in the week that he understood the reactions to the measures, but that demonstrations could harm Greece's image abroad.