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Greece caught between anti-austerity protesters and European demands for more cutbacks
ATHENS, Greece (AP) ' Greece's future in the euro grew increasingly precarious Friday as violence erupted on the streets of Athens and politicians resigned from the government after European leaders demanded that they deliver even deeper austerity.
A day after Greece claimed it had reached an agreement among its squabbling party leaders on new cutbacks, European officials dashed any hopes that the country is out of danger. Finance ministers said more needs to be done and set a deadline for the middle of next week.
If Greece's government fails to meet Europe's demands, the debt-ridden country faces a chaotic debt default next month that would send shockwaves around the world economy and could doom a generation of Greeks to even deeper hardship.
If it does deliver those demands, Europe has committed to give it a euro130 billion ($172 billion) lifeline that would at least postpone Greece's day of reckoning.
"No disbursement without implementation," Jean-Claude Juncker, the Luxembourg premier who also chairs the eurozone's finance ministers' meetings, said Thursday after they declined to fully back the deal Greek leaders had agreed.
The eurozone finance ministers want Greece to find another euro325 million ($432 million) in savings and say Parliament must to vote the austerity through. Worried that Greek political leaders could later renege on the austerity promises, they also requested that the party heads commit to the measures even after general elections in April.
The fallout from the eurozone's demands was immediate in Athens.
Thousands of protesters marched through the streets to protest cuts including a 22 percent reduction in the minimum wage
Resistance was also growing in Athen's halls of power, with two deputy ministers leaving the government because they could not agree to the new demands. Deputy Agriculture Minister Asterios Rondoulis announced his resignation on Friday a day after Deputy Labor Minister Yiannis Koutsoukos, a Socialist, did the same.
George Karatzaferis, leader of the rightist LAOS party that is backing the government coalition, said he was withdrawing support for the measures agreed a day earlier, describing the country's treatment by its European partners as "humiliating."
Though LAOS is a pretty small party, it's a sign of the discontent that's growing in a country that's in its fifth year of recession, embroiled in seemingly-daily strikes and mired in mass unemployment ' nearly one in two young people are out of work.
Though LAOS is a small party, its action comes amid growing discontent country suffering a fifth year of recession and mired by frequent strikes and mass unemployment ' nearly one in two young people are out of work.
LAOS has 16 deputies in the 300-seat parliament in a coalition backed by 252 lawmakers, posing no direct threat to the measures that are due to be voted late Sunday and backed by the two major coalition parties, the Socialists and conservatives.
Faced with growing dissent, the Socialists and conservatives have both called emergency meetings of their parliament members following a Cabinet meeting scheduled for 1600 GMT.
The uncertainty hit global markets, as shares on the Athens Stock Exchange plunged 4.6 and the euro sank 0.7 percent to $1.3180.
As well as trying to secure the bailout, it is close to concluding a related debt-relief agreement with banks that would slash euro100 billion ($132 billion) from the country's national debt.
In return, it has caved in to pressing demands to fire 15,000 civil servants in 2012, slash the minimum wage and other private sector pay.
Karatzaferis insisted it was not his intention to withdraw from the government, and urged other countries in the European Union to challenge what he described as Germany's domination of the union.
"Of course we do not want to be outside the EU, but we can get by without being under the German jackboot," he told a news conference. "Like all Greeks, I am very irritated ... by this humiliation."
In central Athens, clashes erupted outside Parliament, as dozens of hooded youths threw fire bombs and stones at police, who responded with tear gas. Three people were hurt, police said.
The violence broke out as thousands took to the streets of the capital after unions launched a two-day general strike against the planned austerity measures.
Police said some 7,000 people took part in the demonstration. Another 10,000 Communist supporters held a separate, peaceful march.
Scores of youths, in hoods and gas masks, used sledge hammers to smash up marble paving stones in Athens' main Syntagma Square before hurling the rubble at riot police.
The country's two biggest labor unions stopped railway, ferry and public transport schedules, and hospitals worked on skeleton staff while most public services were disrupted. Unions were planning protests in Athens and other cities around midday.
Prime Minister Papademos and heads of the three parties backing his government ' including Karatzaferis ' had already agreed to deep private sector wage cuts, civil service layoffs, and significant reductions in health, social security and military spending.
The harsh measures follow two years of severe income losses, repeated tax hikes and retirement age increases that failed to signally improve the country's finances. Unemployment is at a record high of 21 percent ' with more than a million people out of work ' while the economy is in its fifth year of recession and is expected to contract up to 5 percent in 2012.
The country's politicians have taken a lot of criticism for the situation, and polls show the majority Socialists, elected in a 2009 landslide are now languishing at around 8 percent.
"We are experiencing tragic moments," Deputy Prime Minister Theodoros Pangalos told Parliament Friday.
EU Commission President Jose Manuel Barroso on Friday offered hope a deal could still be struck.
"I am confident that a solution will be reached next week as this is critically important for Greece and the Greek citizens first and foremost but also for the whole euro area," he said during a visit to India.
Gabriele Steinhauser and Slobodan Lekic in Brussels and Angela Charlton in Paris contributed.