"There are other things the [government] can do, before taking money from a retiree who earns 500 euros [$660] a month," Spyros Papaspyros, leader of the ADEDY civil servants' union, said.

Schools, hospitals and tax offices were among the services closed on Wednesday.

Aircraft have been grounded, ferries have remained in docks and public transport has been halted.

'Heated atmosphere'

Al Jazeera's Barnaby Phillips, reporting from Athens, said thousands of people had been gathering outside the parliament, shouting slogans and shaking their fists.

"From what I've seen so far this is only the Communist trade union. We understand bigger crowds are still coming," he said.

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"The atmosphere in central Athens is already quite heated. Over the last few days, I've felt that anger is growing in many sectors of Greek society.

"That's why we've seen some quite unusual scene. We've seen naval officers and private school teachers marching in the streets."

The general strike is the third to paralyse the country in as many months.

The strike began as the European Commission said that Greece's economy is set to contract by three per cent in 2010, in a far gloomier estimate than they delivered in November.

The commission also forecast the country's deficit would be 9.3 per cent of GDP in 2010 and 9.9 per cent in 2011.

Greek stocks dropped over three per cent in early trades on Wednesday amid concerns over whether the
government will be able to push through the unpopular austerity drive.

The ATHEX index of leading Greek shares showed a loss of 3.39 per cent at 1,671.03 shortly after trading began, with the strike expected to test the government's resolve to go ahead with spending cuts and tax hikes.

"There's a lot of negative psychology and a lot of the transactions are part of margin calls and there is a lot uncertainty about the stability programme," Manos Chatzidakis at Greek brokerage firm Pigasos said.

Incomes cut

The cuts, some of which have already been implemented, will significantly affect civil servants' and pensioners' incomes.

Among the major measures announced on Sunday were a cut in bonus pay for civil servants and retirees; three years more for pension contributions; and the raising of the retirement age for women to 65, the same level as men.

Greece's socialist government is looking to push the measures, planned to be rolled out over three years, through parliament on Thursday.

The government has a large majority in the house.

Protests earlier this year have seen violence between demonstrators and police.

During a May Day rally, anarchists clashed with police who in turn fired tear gas.

Fears that the crisis could spread caused a fall in Asian markets on Wednesday, as well as European and US markets on Tuesday.

The euro also fell to a one-year low against the dollar during Asian trading.