Greek Prime Minister George Papandreou said Wednesday he would reshuffle his cabinet and seek a vote of confidence for his new government this week, after coalition talks with opposition parties failed.

The moves are a bid to ensure parliamentary approval for a crucial austerity bill and came as Athens was rocked once more by anti-austerity riots.

"Tomorrow I will form a new government and immediately afterwards I will ask for a vote of confidence from parliament," the prime minister said, adding that "The country is facing critical times."

The turmoil in the debt-ridden country triggered a sell-off in financial markets.

Papandreou has been struggling to contain an internal party revolt over a new program of tax hikes and spending cuts that is the main condition for continued funding from an international bailout and avoiding a devastating default that would affect the global economy and undermine the future of the euro zone.

Earlier reports had suggested that Papandreou, the head of the Socialist government, and conservative party leader Antonis Samaras had discussed the creation of a power-sharing government to deal with the country's debt crisis.

The reports said Papandreou had been willing to resign, but only if a new, power-sharing coalition government agreed on measures for dealing with the debt crisis.

Papandreou's socialist government has been trying to push through a new program of tax hikes and spending cuts worth more than $39 billion in order to get the next instalment of bailout funds from the International Monetary Fund and the European Union.

The new measures must be passed by parliament before the end of the month if debt-ridden Greece can continue receiving funding from its international bailout.

Protesters throw rocks and firebombs

Groups of youths on the edge of a major anti-austerity protest in Athens threw rocks and firebombs at police outside parliament, where the struggling government sought support for new cutbacks required to avoid a debt default. 

At a rally of more than 30,000 in the Syntagma Square, police responded with tear gas to push the protesters away from barricades erected to protect the parliament building and the legislators arriving to debate the new austerity plan.  

There were reports of a human stampede of people away from the Finance Ministry after demonstrators bolted into the tented area to escape the violence and tear gas.

Other demonstrators who had been part of the previously peaceful gathering also clashed with violent groups of hooded youths, trying to eject them from their rally. 

The protests were part of a 24-hour general strike against the new cutbacks, which the country must pass in order to continue receiving funding from a 110-billion euro international bailout that is preventing it from defaulting on its debts.

"Resign, resign," the crowd chanted outside parliament. The protesters included both young and old, and many brought their children, hoisting them onto their shoulders to shield them from the crush.  

Such marches have often turned violent in the past, and three clerks died when rioters torched their bank during a mass demonstration in Athens last May. Some 40 people have been detained and there is one injury. No deaths have been reported in the escalating violence.

Harsh outlook  

"What can we do? We have to fight, for our children and for us," said Dimitra Nteli, a nurse at a state hospital who was at the protest with her daughter. "After 25 years of work I earn 1,100 euros a month. Now that will drop to 900. How can we live on that?" 

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A protester kicks at a riot police officer in Athens on Wednesday. He was among an estimated 20,000 demonstrators and 5,000 police. (Panagiotis Tzamaros/AFP/Getty Images)

Her 26-year-old daughter, Christina, said the situation in Greece had led her to seek a university place abroad. She is leaving to study conflict resolution in the U.K.  

"I have no job here. There are no prospects," she said  

Police spokesman Athanassios Kokalakis said 10 protesters were briefly detained for trying to prevent lawmakers from reaching parliament. About 100 people booed and heckled as cars carrying the prime minister and President Karolos Papoulias swept past.  

It left state hospitals running on emergency staff, disrupted port traffic and public transport, and forced radio and television news programs off the air. Journalists' unions, however, later called off the strike to cover developments in Athens.  

Flights were also operating normally after the air traffic controllers' union dropped out of the strike.

"They keep asking us to give more," said Ilias Iliopoulos, general secretary of the civil servants' union ADEDY. "Now, again, they will cut our salaries and bonuses, from the little that we have left."

To meet their commitments, Papandreou's Socialists' abandoned a pledge not to impose new taxes and have drawn up a four-year privatization program worth 50 billion euros — further fuelling protests against austerity by public utility employees and other affected groups. 

Some of the legislators from the governing party have publicly criticized the new cuts. One of them defected on Tuesday, reducing Papandreou's parliamentary majority to five in the 300-seat legislature. Another Socialist lawmaker said he will vote against the bill.

Credit rating nears bottom

With its credit rating deep in junk status, Greece is being kept afloat by the EU and IMF bailout, but will need additional support to cover financing gaps next year as high interest rates will prevent it from tapping the bond market next year, contrary to what the original bailout agreement had predicted.

On Monday night, Standard & Poor's slashed Greece's rating from B to CCC, dropping it to the very bottom of the 131 states that have a sovereign debt rating. That suggests Greece's creditors are less likely to get their money back than those of Pakistan, Ecuador or Jamaica.

It's an astonishing low for Greece. As recently as January 2009, the country still had a stellar A rating despite a hefty debt burden.

Punishing austerity measures have seen the Socialists' popularity plummet in recent weeks. A weekend opinion poll gave the main opposition conservatives a four-point lead over their Socialist rivals, the first time the party has been ahead in surveys since 2009. The next general election is scheduled for October 2013.

With files from The Associated Press