Greece hit by strike as EU ministers discuss debt crisis

A strike by civil servants against government cuts brought Greece to a halt Wednesday as European Union ministers held talks on the debt crisis threatening a growing number of euro countries.

The EU talks with European Central Bank president Jean-Claude Trichet heightened speculation that a bailout deal was close. But in a new sign of the eurozone's problems, Portugal's prime minister said his debt-stricken country faces a fight to get its finances in order.

The strike in Greece closed government offices, schools and colleges while hospitals only dealt with emergencies. Flights over Greece were suspended as air traffic controllers joined the protest and rail services were disrupted.

The ADEDY civil servants union said over 75 percent of public officials went on strike.

Around 10,000 people took part in an anti-austerity demonstration in Athens and 3,000 in the second city of Thessaloniki.

Protesters waved banners proclaiming: "The plutocracy should pay for the crisis," and specifically targeted "bankers, shipowners and big business."

Since the Socialist government revealed last year that the country's finances were in much worse shape than had been thought, markets have punished Greece, doubting the government's will to take decisive action.

The Greek prime minister George Papandreou, who travelled to Paris on Wednesday, has asked civil servants to accept bonus cuts as an example to the rest of the country.

EU leaders were to discuss the Greek crisis at a summit Thursday in Brussels.

"We are ready to take any necessary measure in order to make sure that the goal of cutting our deficit by four percent in 2010 to 8.7 percent of our GDP" is achieved, Papandreou said after meeting French President Nicolas Sarkozy.

Athens is trying to slash expenditure and raise revenue to narrow its 12.7 percent deficit, which is more than four times the permitted eurozone limit as a percentage of gross domestic product.

The Greek crisis has driven up borrowing costs for governments across Europe, particularly for other indebted eurozone governments, and sent the euro sliding against the dollar.

Related article: Eurozone ministers in Greece talks

So sensitive are the markets that the news Trichet was leaving a central bankers' meeting in Sydney early to attend the EU summit was enough to bolster speculation that a deal was in the works.

That eased worries over Europe's debt troubles and brought most markets higher following a rally on Wall Street.

While sources said there was no agreement yet, signs multiplied that a support mechanism for Greece would emerge.

Reports said Germany was looking to lead an EU "firewall" to contain the Greek crisis, possibly by guaranteeing loans to calm fears of a government default.

A "standing facility" to show that money is available, a kind of cheque guarantee, is being considered to provide market confidence for Greece, the Financial Times Deutschland said.

However a German government source said Berlin has not made any decision on possible aid, and retained confidence in Athens's ability to get its finances in order.

"The question of a possible default is not on the agenda. There is no risk of a default," the source in Berlin said.

A British diplomat, whose government is not part of the eurozone, agreed that talk of a bailout was premature.

"We are not near the stage where they might be defaulting," he said.

Portugal's government is confronting its own debt mountain.

Speaking before a crisis debate in parliament, Prime Minister Jose Socrates said his planned budget was crucial to the country's credibility and stability, warning that "the road will be difficult and demanding".

The government has said it intends to reduce the public deficit by one percentage point to 8.3 percent in 2010. By the end of this month it must present a financial stability and economic growth programme to the European Commission.