The main public sector union, ADEDY, began a 48-hour national strike that shut down ministries, tax offices, schools, hospitals and public services, with thousands of protesters converging on Parliament in the center of the Greek capital.
Greek police guarding Parliament fired teargas at a small group of protesters who threw rocks and bottles at them.
“We want an end to the freefall of our living standards,” said Spyros Papaspyros, the head of ADEDY, which represents about half a million workers in the Aegean nation of 11 million.
The euro slid for a second day to hit a one-year low against the dollar below $1.31 and Greek bonds fell, pushing yield spreads with benchmark German Bunds above 600 basis points.
Jitters about whether the 110 billion euro ($146.5 billion) aid package would be enough to stem the euro zone’s sovereign debt crisis also pushed up Spanish and Portuguese spreads and hammered Spanish stocks.
“This would suggest that contagion fears have not been fully doused, with the Greece rescue terms not allaying fears of states facing similar challenges,” Nomura rate strategist Sean Maloney said.
Markets were spooked by an announcement from investment bank Lazard that it had been hired by the Greek government to give it financial advice. Lazard recently advised countries like Argentina, Ecuador and Ivory Coast on sovereign debt restructurings, a move Greece has repeatedly said it is not considering.
“Any form of debt restructuring is out of the question,” Greek Finance Minister George Papaconstantinou told Reuters after news of the Lazard hire. “No one has been hired to advise us in this regard.” Worries that the aid package may be insufficient to meet Greece’s borrowing needs have contributed to market concerns.
Economists at several European financial firms calculated those needs to the end of 2012 at 120 billion euros, based on latest IMF and Greek government figures. Germany’s Bild daily cited a government estimate of 150 billion euros given to the parliamentary finance committee.
European Commission officials said they expected Athens to be able to return to markets for funding in the second half of 2011 once it had won back credibility by implementing tough reforms.
But that remains a big “if,” given the grim economic outlook and the scale of public opposition.
CEO Josef Ackermann, who has been spearheading a drive in Germany to get the private sector to participate in the bailout, said fellow German firms Allianz and Munich Re had responded positively.
German Finance Minister Wolfgang Schaeuble said that Greece may not have to tap the full amount of aid pledged to it because of contributions from the financial sector.
Some newspaper editorials said the bailout was more a rescue for European banks holding Greek debt than one of ordinary Greeks.
“With this aid package, we’re really only aiding ourselves -- we’re bailing out our own banks and investors,” German business daily Financial Times Deutschland said.
It said the message to Greece was: “Would you kindly pinch the money from your pensioners, functionaries, and hopefully a bit from your bloated military please? Thank you for doing it for us, whatever your reasoning may be.”
