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Greeks go on strike before austerity budget vote

ATHENS (Reuters) - Greek unions called a general strike on Wednesday and Athens was paralyzed by a 24-hour public transport stoppage in protest against the government’s 2011 budget, set to pass later as part of an EU/IMF bailout.

Employees of the Athens metro close an entrance of the central Syntagma station during a 24-hour strike in Athens December 22, 2010. REUTERS/Yiorgos Karahalis

The budget, meant to help stem a debt crisis that has shaken the euro zone, includes further tax hikes and wage cuts in state-run enterprises, especially in public transport.

Fitch said on Tuesday it may cut Greece’s credit rating next month to junk as both other major rating agencies have done.

“Even though this news was expected, it will go down badly with the markets, there is widespread fear about downgrades coming,” said Ioanna Telioudi, analyst at HSBC in Athens.

Greece’s main public and private sector labor unions have called a 3-hour strike from 1000 to 1300 GMT (5 to 8 a.m. ET) in Athens. Thousands are expected to rally outside parliament.

Athens bus and subway drivers have been holding on and off strikes for two weeks, keeping Christmas shoppers from the city center, adding to the strain of recession-hit retailers.

The government threatened on Wednesday to break the public transport strikes, invoking emergency legislation it used earlier this year to dissolve Labor action by truck drivers and other transport workers.

“Everyone has to show responsibility ... the state has all the powers it needs to protect the public interest,” government spokesman George Petalotis said in a television interview.

Analysts have warned the additional measures will hurt the economy even more without providing guarantees that the country will avoid a debt restructuring to cope with ballooning debt.

The government has a comfortable majority of 156 seats out of 300 in parliament and the budget is expected to be approved despite growing discontent among the ruling PASOK party ranks.

“I am giving the government a last chance,” said PASOK deputy Thomas Robopoulos during the budget debate on Tuesday. Since the EU/IMF bailout agreement was signed in May, Prime Minister George Papandreou has expelled four deputies for disagreeing publicly with his austerity policies

The socialists, who revealed a gaping budget deficit after coming to power last year, have braved public discontent and taken draconian measures to meet the bailout terms.

The government has cut public sector wages by about 15 percent, increased the retirement age, frozen pensions, cut public spending but has failed to boost tax collection as much as targeted, despite a hefty VAT increase.

Greece’s lenders have said that the country was broadly on track with its fiscal program but needed to step up reforms and spending cuts next year.

Partly as a result of the measures, the economy is seen shrinking by 3 percent next year after a 4.2 percent drop in 2010, with unemployment jumping to a record 14.6 percent from an estimated 12.1 percent this year.

Greece targets a deficit of 7.4 percent of GDP next year, from about 9.4 percent this year.

Greek protesters clashed with police last week and set fire to cars and a hotel in central Athens earlier this month, as some 50,000 marched against austerity in the biggest and most violent march since three died in protests in May.

Editing by Louise Ireland