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Greek unions launch 1st assault on austerity plan

ATHENS, Greece — A strike by civil servants grounded all flights and shut down public services across Greece on Wednesday, as labor unions mounted their first major challenge to austerity measures in the debt-plagued country.

Air traffic controllers, customs and tax officials, hospital doctors and schoolteachers walked off the job for 24 hours to protest sweeping government spending cuts that will freeze salaries and new hiring, cut bonuses and stipends and increase the average retirement age by two years to 63.

The strike left state hospitals working with emergency staff only and disrupted national rail travel, although urban mass transport was unaffected.

"It's a war against workers and we will answer with war, with constant struggles until this policy is overturned," said Christos Katsiotis, a representative of a communist-party affiliated labor union.

Despite the harsh rhetoric, turnout in Athens' two peaceful protest marches was low, at about 7,000 amid drizzly weather, in a country where union demonstrations typically draw tens of thousands. Another 3,000 people showed up for two rallies in Thessaloniki, Greece's second-largest city.

A weekend newspaper poll showed that 70 percent of Greeks backed the prime minister's call to cut civil servants' pay and perks, but were against measures that could affect them individually like new taxes or a higher retirement age.

Greece has come under intense pressure from its European Union partners to slash spending after it revealed a massive and previously undeclared budget shortfall last year that continues to rattle financial markets and the euro, the currency shared by 16 EU members.

Prime Minister George Papandreou, who was in Paris on Wednesday to discuss the economic crisis with French President Nicolas Sarkozy, has repeatedly said Greece will sink under its debt unless everyone contributes to a solution.

But labor unions are unconvinced, and ended weeks of caution Wednesday after Papandreou's new Socialist government deepened cuts, raising the retirement age and even hitting up the country's powerful Orthodox Church for more taxes.

"It wasn't the workers who took all the money, it was the plutocracy. It's them who should give it back," said Alexandros Potamitis, a 57-year-old retired merchant seaman.

Vassiliki Romanou, 50, an employee at the state Social Security Foundation, conceded that many civil servants enjoy high salaries and some can retire after working only 20 years.

"I can't say the government's measures are totally wrong, but I think they are unfair to me," she said.

The government has insisted that those on low incomes will be protected and will even enjoy lower taxes, with the austerity plan targeting the better off.

Finance Minister George Papaconstantinou announced more austerity measures right before the strike, including adding euro0.14 ($0.19) in fuel taxes so a liter of unleaded gas costs euro1.29 ($6.74 a gallon).

He also announcing plans to force all Greek businesses — including gas stations, cab drivers and vendors at farmers' markets — to issue receipts in an effort to fight Greeks' notoriously lax compliance in paying taxes. The average retirement age will also increase to 63 by 2015.

The umbrella civil servants' union that called Wednesday's 24-hour strike, ADEDY, said it will join in a separate one-day strike by Greece's largest labor organization, the umbrella GSEE union, on Feb. 24.

Taxi drivers in the capital also said declared a strike, for Thursday.

"I don't care about the (country's) problems. I didn't steal a single euro, why should I pay?" said Christos, an elderly man who said he retired after working for 47 years and was now barely surviving on a pension of euro640 ($880) a month. He refused to give his surname, saying he was afraid he would lose his pension if he complained.

It remains unclear whether the protests represent the start of a serious labor backlash or just a demonstration of union dissatisfaction in a country where strikes are common.

Papandreou's Socialists came to power in early elections last October, drumming the Conservative party in the polls, and they now enjoy a strong majority of 160 seats in the 300-member Parliament, compared to the main opposition's 91.

Papandreou has already faced down a protest by farmers, who demanded higher subsidy payments and staged tractor blockades on Greek highways for nearly three weeks, ending Tuesday.

Markets have also reacted positively on indications that wealthy European countries are closer to rescuing Greece. Stocks in Europe rose Wednesday for the second day on expectations of some kind of decisive action to prevent a Greek debt default that could spread to other countries, undermining Europe's hesitant economic recovery.

European Union leaders are to discuss Greek's economic woes during a summit Thursday in Brussels. Markets have reacted well to the news that European Central Bank President Jean-Claude Trichet would make a rare appearance at the summit — which they saw as confirmation that some kind of help for Greece would be discussed.

The Athens Stock Exchange opened up Wednesday, with the general price index up 3 percent in afternoon trading, a day after closing up 4.96 percent. The spread between 10-year Greek government bonds and the benchmark German issues of equivalent maturity continued to fall, suggesting fears of a default receded. The spread stood at 283.3 basis points, down from about 320 basis points late Tuesday.

Associated Press writers Derek Gatopoulos in Athens and Costas Kantouris in Thessaloniki contributed to this report.