Greece avoided bankruptcy last year through funds from a three-year, €110 billion ($150 billion) international rescue loan package from other European Union countries using the euro and the International Monetary Fund. In return, the Socialist government has been implementing unpopular austerity measures, including raising taxes, cutting public sector salaries and overhauling labor legislation.

Gross domestic product “is expected to fall by about three percent in 2011, without ruling out a larger reduction,” the Bank of Greece said in its monetary policy report.

The economy contracted by 2.3 percent in 2009 and is projected to have fallen by slightly more than 4 percent last year.

The recession has particularly struck consumption and investment, the Bank of Greece said.

“The uncertainty, the increasing tax burden, the fall in demand and the funding difficulties have led investments to a reduction that in 2010 might have surpassed 18 percent,” it said.

However, it indicated that growth was expected to recover as structural reforms the government is pushing through are realized.

Unemployment was also projected to rise, and was estimated to have surpassed 12.5 percent of the work force in 2010, the Bank of Greece said.

Greece has pledged to bring its budget deficit below the three percent eurozone limit, from 15.4 percent in 2009. The debt crisis, which broke out in late 2009, has left the country reliant on the IMF/EU bailout loans and essentially locked out of the long-term international debt market, with investors demanding prohibitively high interest rates for its bonds.

However, the country has been able to tap the short-term market with regular issues of treasury bills since last September.

On Tuesday, Greece raised €390 million ($524 million) in an auction of 13-week treasury bills, with the interest rate dropping slightly compared with a similar sale last month, the Public Debt Management Agency said.

The drop in the rate shows a slight improvement in investor confidence in the country’s public finances.

The sale’s yield stood at 3.85 percent, down from 4.10 percent in a similar sale on Jan. 18, while the auction was 5.08 times oversubscribed, compared with 4.98 times in January, the agency said. It had originally been seeking to raise €300 million.

The government’s austerity measures, which are essential if Greece is to continue receiving the quarterly installments of bailout loans, have been widely unpopular and have led to a series of strikes and demonstrations.

Transport workers are the latest group to have taken to the street, with the capital’s bus, metro, tram and trolleys grinding to a halt in a 24-hour strike Tuesday to protest reforms in the public transport sector.

The reforms are designed to reduce expenditure and waste at Greece’s loss-making public transport companies, but workers fear an erosion of their rights, and were planning a demonstration outside Parliament Tuesday afternoon, when lawmakers will be discussing and voting on the bill.

Public transport ticket prices were increased by up to 80 percent earlier this month as part of efforts to reduce the companies’ losses.

Labor unions have called a nationwide general strike next Wednesday.

151311 feb 11GMT