Greece has announced further austerity cuts after pledging to do "anything" to stay in the eurozone and secure bankruptcy-saving loans, as unions announced new strikes against the latest measures.
Pensions above $1,650 per month will be cut and 30,000 state employees will be temporarily laid off, the government said in a statement following a cabinet meeting on Wednesday.
After debt inspectors from Europe and the International Monetary Fund (IMF) made clear it was losing
patience over the failure by Athens to meet the fiscal targets of its bailout, the cabinet agreed to push through new austerity measures to comply with the programme through 2014.
Public anger is high over the belt-tightening campaign that is driving the country into a fourth year of recession.
Powerful labour unions and public transport workers said on Wednesday that strikes could begin the next day in opposition to the measures.
The cabinet also agreed to further reduce payments for former state workers who had retired before the age of 55, and will extend a new property tax hike originally slated to expire next year until at least 2014.
It will also put tens of thousands of civil servants in "labour reserve" this year, reducing their pay to 60 per cent and giving them 12 months to find new work in the state sector or lose their jobs.
"These choices are sending a message to markets and our partners that Greece wants to and can fulfill its obligations and remain firmly in the very core of the euro and the European Union," government spokesman Ilias Mossialos said.
Financial players are almost certain Greece will default, an event economists and policymakers fear could set global markets tumbling and push other vulnerable eurozone members like Italy and Spain over the edge, potentially splitting the currency area.
But they see little chance the inspectors will deny Athens its next $11bn aid tranche before the eurozone strengthens its safety programme designed to limit contagion.
The so-called troika of debt inspectors from the European Commission, European Central Bank and IMF is expected to return to Athens early next week to complete their review.
Analysts said the steps signalled a realisation in the government, which has struggled against public anger and resistance in its own ranks to implement its pledged reforms, that it had to show it was serious about cutting costs rather than trying to raise revenue with one-off tax cuts.
"The measures announced today show determination on behalf of the Greek government to speed up fiscal adjustment," Nikos Magginas, an economist at National Bank of Greece.
"The should satisfy the troika's demands for permanent measures aimed at spending cuts."
A few thousand protesters rallied in Athens' central Syntagma square in front of parliament against the new austerity measures.
"I've been honestly working for 25 years," said 49-year-old public sector employee Sofia Vardaki.
"They have no right to throw me out now. I don't want to sit on my couch doing nothing. I want to work."
One of Greece's biggest unions planned a three-hour work stoppage against education reforms, while it agreed with another union, which together represent some 2.5 million workers, to strike for two days on October 5 and October 19 to protest cost cuts.
"We will fight to the end, to topple this policy," Ilias Iliopoulos, general secretary of public sector union ADEDY, told the Reuters news agency on Wednesday. "The troika and the government must go."
The strikes represent the first big nationwide protests since early summer, when daily demonstrations culminated in violent clashes after weeks of unrest.
The country remains bitterly divided between private sector workers who say a bloated state bureaucracy is strangling Greeks and public servants who say the biggest problems are political corruption and tax evasion.