Greece is suffering from a budget deficit that is four times the European Union limit.

Runaway deficit

The socialist government has announced fresh measures to further cut the public salary bill and hike taxes, defying unions with plans to save the state $1.1bn this year.

"Today, the workers give their reply," protesters said over loudspeakers in the capital's central Syntagma Square, where hundreds of pensioners and striking workers began gathering on Wednesday for the demonstrations planned later in the morning.

"They had promised the rich would pay but instead they take the money from the poor," Ilias Iliopoulos, general secretary of the public sector umbrella union ADEDY, said.

in depth

  Blog: Greece is a crisis for all of Europe
  Video: Greeks strike over austerity plan

"This is the policy we are fighting, not the effort to get out of the crisis."

Unions oppose plans to freeze public salaries, cut the salary supplements many Greeks get on top of their basic pay, and replace only one in five people leaving the civil service.

Al Jazeera's Barnaby Phillips, reporting from Athens, said there was a difference of opinion in Greece over who is responsible for the crisis.

"Many of the workers going on strike today will tell you that their salaries are very, very small, that they can't afford further cuts and that they are not the ones who got Greece into this mess.

"The government's analysis is different. It says that the public sector in Greece is bloated, inefficient ... that it is dragging this country down and drastic measures need to be taken."

Continental concerns

The European Commission has voiced concern that Greece's fiscal crisis could affect other parts of the 16-nation eurozone and EU leaders were due to discuss the issue during a summit in Brussels on Thursday.

European governments have agreed in principle to support Greece and are considering various options, including bilateral aid, a senior German coalition source said on Tuesday.

Phillips said that if the EU decided not to help Greece, the other option would be the International Monetary Fund (IMF).

"The IMF has helped other eastern European countries like Latvia and Hungary over the last year but it hasn't had to step into the eurozone itself," he said.

If it did, that would be a significant humiliation for Greece and for Europe."

There is concern that Greece's fiscal crisis could affect other parts of the eurozone [Reuters]
A report in the Financial Times Deutschland on Wednesday suggested that Germany was preparing an aid plan for Greece.

The newspaper said Wolfgang Schaeuble, the German finance minister, was working on both a bilateral basis and at the European level on putting together a package to help Athens.

An unnamed government official quoted by the Financial Times said it was more self-interest than altruism that was driving Berlin.

"We are thinking about what we should do if the crisis spills from Greece into other euro countries," the official was quoted as saying.

"So it's more about finding firewalls, containing the problem, than principally about helping the Greeks."

Concerns over the Greek debt and other weak European economies made the euro reach an eight-month low against the US dollar last week.

It is believed that other eurozone nations may prefer to help Athens rather than have it go to IMF, which could further shatter confidence in the euro.