ATHENS (Reuters) – Striking Greek workers denounced a new wave of austerity on Friday as an imposition too far by Europe and the IMF. Finance Minister Evangelos Venizelos told the nation it faced a stark choice between sacrifices inside the euro area and bigger sacrifices outside.

Police fired teargas at black-masked protesters who threw petrol bombs, stones and bottles in central Athens at the start of a 48-hour general strike against planned pay and job cuts. But street protests were relatively small and mostly peaceful.

The biggest police trade union said it would issue arrest warrants for Greece’s international lenders for subverting democracy, and refused to “fight against our brothers.” A daily newspaper depicted German Chancellor Angela Merkel in a Nazi uniform with a swastika armband.

As public rage simmered, the leader of the far-right LAOS movement, the smallest of three parties backing Prime Minister Lucas Papademos, said he would not vote for the harsh austerity program in a crucial parliament vote due on Sunday or Monday.

“Greeks cannot be hostages and serfs,” LAOS leader George Karatzaferis told a news conference. “We were robbed of our dignity, we were humiliated. I can’t take this. I won’t allow it, no matter how hungry I am.

“Germany decides for Europe because it has a fat wallet and with that fat wallet it rules over the lives of all the southern countries.”

His party has 15 deputies in the 300-seat parliament, dominated by the socialist PASOK and conservative New Democracy parties, which both support the Papademos government.

LAOS’ four ministers tendered their resignation, but Karatzaferis rejected calls for an early general election and suggested the prime minister appoint more technocrats instead.

Venizelos made clear Greece has little choice but to accept the harsh conditions attached to a 130 billion euro bailout, and a plan to halve its huge debt to private bondholders, to avoid a chaotic default when big bond repayments come due next month.

“It’s time for us to make up our minds,” he said after euro zone finance ministers refused to give immediate approval to the bailout plan. “Unfortunately, we have to choose between sacrifices and even bigger sacrifices.”

The European Union and IMF have been exasperated by a series of broken promises and weeks of disagreement over the terms of the bailout, which would be Greece’s second since 2010, with time running out to avoid a default.

The ministers gave Athens six days to prove its commitment by passing key legislation, finding an extra 325 million euros in savings, and providing assurances that the program will remain in force after any election.

Summing up their deep mistrust, Jean-Claude Juncker, chairman of euro zone finance ministers, said: “In short, no disbursement before implementation.”

The euro and European shares fell, reflecting concern that the Greek bailout and debt swap could fail.

“RESIST!”

The austerity plan includes lowering the minimum wage by 22 percent, axing 150,000 public sector jobs and reducing pensions.

Some protesters compared Greece’s plight, facing bankruptcy unless it accedes to the demands of international lenders, to its seven years under military dictatorship.

On Syntagma Square in central Athens, songs from the struggle in the 1960s and 1970 against a junta of colonels boomed out over loudspeakers.

Police said three policemen and two protesters were slightly injured in clashes. Five people were detained.

With Greece probably at its lowest ebb since the junta was overthrown in 1974 and democracy restored, protesters denounced the “troika” of lenders – the European Commission, European Central Bank and International Monetary Fund.

“Do not bow your heads! Resist!” They chanted. “No to layoffs! No to salary cuts! No to pension cuts!

Even the police, who have repeatedly clashed with protesters since the crisis broke out more than two years ago, announced resistance to the creditors’ demands.

“As we can see you are continuing this destructive policy, so we warn you that you cannot make us fight against our brothers,” the Greek Police Federation said in an open letter to the troika.

“We warn you that as legal representatives of the Greek police, we will issue arrest warrants for a series of legal violations … such as blackmail, covert abolition or erosion of democracy and national sovereignty.”

Papademos announced on Thursday that the three parties in his coalition government had agreed to the austerity and reform package.

However, Venizelos failed to persuade his euro zone peers to approve immediately the deal and an accompanying bond swap, which will cut the value of the debt held by Greece’s private creditors by about 70 percent.

A FINAL CHOICE

The finance minister made clear that the fate of the package and the PSI (Private Sector Involvement) bond swap depended on what Greece decided in the next few days.

“Until the next Eurogroup which will most likely convene on Wednesday, our country, our people should think and make a final strategic choice,” he said.

“If we see the future of our country within euro zone, within Europe, we should do what we have to do for the program to be approved and for the PSI to be concluded on time before major bonds expire in March.”

Resistance is growing among nervous lawmakers who must face the electorate shortly.

The socialist deputy labor minister resigned in protest on Thursday while about 35 socialist deputies called for measures to ease the effects of the new austerity.

According to Athens News Agency, socialist lawmaker Pavlos Stasinos resigned on Friday and news websites reported that another deputy was threatening to quit. However, only mass defections would sink the package in parliament.

“There will most likely be a string of defections and abstentions but I don’t believe that the measures will fall short of the majority required,” political analyst George Sefertzis told Reuters. “Voting for them will be painful for MPs, but assuming responsibility for a bankruptcy would be as onerous, if not more so.”

In Friday’s strike, ships were stuck in Piraeus port and public transport halted but flights were not affected. Hospital doctors and bank employees also walked off the job.

“The measures included in the new memorandum and which the three political leaders agreed with the government and the troika are the ‘tombstone’ of the Greek society,” civil service union ADEDY said. “It’s time for the people to speak up.”

ADEDY and its private sector sister GSEE represent about two million workers, or roughly half the country’s workforce.

(Additional reporting by Angeliki Koutantou and Tatiana Fragou in Athens, Stephen Brown in Berlin; Writing by Ingrid Melander/David Stamp/Paul Taylor; editing by Janet McBride)

ATHENS (Reuters) – Greece’s government is preparing a document with a list of painful reforms needed to clinch a new financing package, a government official said on Tuesday, moving Athens one step closer to a deal needed to avoid a chaotic debt default.

Officials worked on the draft of a text on the 130-billion-euro bailout plan that will be put to political leaders for approval as strikers protesting against more austerity tussled with police outside parliament.

“The Greek government is working on the final document that will be discussed at the political leaders’ meeting later in the day,” the official told reporters.

Safe haven German government bond futures reversed gains on news of progress in the talks, while the euro also rose against the dollar.

Prime Minister Lucas Papademos negotiated through most of the night with Greece’s European Union and IMF lenders, ending at 4 a.m. (0200 GMT) when a 24-hour strike began against the reforms, closing tourist sites and disrupting public transport.

Papademos, a technocrat parachuted in to lead the Greek government late last year, must persuade leaders of the three parties in his coalition government to accept the EU/IMF conditions for the 130-billion-euro ($170-billion) rescue.

“We must find a solution today,” said another government official. A third official said one of the main outstanding issues was the level of cuts on top-up, supplementary pensions.

Papademos is also due to meet Charles Dallara, who is negotiating on behalf of banks and insurers on a planned bond swap to ease Greece’s debt burden.

With Greece’s future in the euro zone in question, German Chancellor Angela Merkel said time was of the essence and there are growing signs that euro zone officials have lost patience.

They say the full package must be agreed with Greece and approved by the euro zone, European Central Bank and International Monetary Fund before February 15.

This is to allow time for complex legal procedures involved in a bond swap deal – under which the value of private investors’ holdings of Greek debt will be cut radically in value – so Athens can get rescue funds before March 20 when it has to meet heavy debt repayments or suffer a chaotic default.

“DON’T BOW YOUR HEADS!”

The funds come at the price of deeply unpopular wage and spending cuts that have infuriated ordinary Greeks struggling through the country’s fifth year of recession.

Scuffles broke out as protesting strikers tried to climb steps leading to parliament, chanting: “No to mediaeval labor conditions, don’t bow your heads, show resistance!”

Riot police rushed to block their way as some protesters sprayed red paint on the steps and a wall next to the tomb of the unknown soldier, which commemorates the fallen in past Greek campaigns. Other protesters burned a German flag and a Nazi flag.

Ceremonial guards in traditional Greek kilts, a top Athens tourist attraction, were evacuated and the protesters were pushed back on to the adjacent Syntagma Square, where riot police created a defensive line.

However, the turnout was noticeably smaller than at other protests in recent months, with heavy showers dampening the marchers’ spirits. “They were saved by the rain. The weather didn’t allow all protesters to take to the streets and show their anger,” Ilias Iliopoulos, general secretary of the public sector union ADEDY, told Reuters.

One civil servant watching the protests expressed a weary anger at the austerity imposed already, which has almost halved her monthly pay to 900 euros, and higher taxes.

“I wouldn’t mind paying for the next two years if I knew austerity would take us somewhere,” said 32-year-old Leto Papadopoulou. “But this crisis seems endless. In 10 years from now, I will be a lost case for the labor market.”

Early on Tuesday, the strike called by the private and public sector unions GSEE and ADEDY began to bite, bringing the country’s main port to a standstill.

“No ships departed from Piraeus port this morning, as a result of the seamen’s strike,” said a coast guard official.

In central Athens, tourists were locked out of the Acropolis and public transport was disrupted during the morning rush hour. State hospitals ran on a skeleton staff and teachers, bank employees and telecoms workers were due to join the action.

NOT AS FAR APART AS BEFORE

Finance Minister Evangelos Venizelos said earlier talks with the “troika” of lenders – the European Commission, ECB and IMF – were not going well. “Unfortunately the negotiations are so tough that as soon as one chapter closes, another opens,” he said after meeting troika officials on Monday night.

But a source close to the negotiations said that despite the complexity of the talks, especially on very unpopular labor reforms, Greece and its lenders were making progress.

“We are not as far from each other as we were before,” the official said, adding the two parties were working to finalize the outline of the “memorandum of understanding,” or policy program Greece needs to agree to in order to get the bailout.

With elections likely in April, the party political leaders – who Europe insists must all sign up to the austerity program – face an obvious incentive not to heap more misery on their voters. But if they do not, an unruly default looms.

After weeks of argument major issues have not been settled.

Greece has yet to identify spending cut measures worth 600 million euros this year, out of a total austerity package of about 3.3 billion euros, a government official said.

The troika was also demanding that private firms’ wage costs be cut by about a fifth to improve competitiveness. This would be done by reducing the minimum wage by as much as 20 percent or by scrapping some industry-wide wage bargaining agreements.

Jean-Claude Juncker, who chairs the group of euro zone finance ministers, backed a plan put forward by Merkel and French President Nicolas Sarkozy to set up a special escrow account into which Greece would make future interest payments as a means of guaranteeing that creditors were consistently paid.

However, Juncker denied that the euro was in danger because of the debt crisis. “The euro will outlive us all,” he told German Inforadio on Tuesday.

($1 = 0.7646 euros)

(Additional reporting by Yannis Behrakis, Renee Maltezou, Karolina Tagaris and Harry Papachristou and Gareth Jones in Berlin; Writing by Deepa Babington and David Stamp; Editing by Mike Peacock)

ATHENS (Reuters) – Greece’s government is preparing a document with a list of painful reforms needed to clinch a new financing package, a government official said on Tuesday, moving Athens one step closer to a deal needed to avoid a chaotic debt default.

Officials worked on the draft of a text on the 130-billion-euro bailout plan that will be put to political leaders for approval as strikers protesting against more austerity tussled with police outside parliament.

“The Greek government is working on the final document that will be discussed at the political leaders’ meeting later in the day,” the official told reporters.

Safe haven German government bond futures reversed gains on news of progress in the talks, while the euro also rose against the dollar.

Prime Minister Lucas Papademos negotiated through most of the night with Greece’s European Union and IMF lenders, ending at 4 a.m. (0200 GMT) when a 24-hour strike began against the reforms, closing tourist sites and disrupting public transport.

Papademos, a technocrat parachuted in to lead the Greek government late last year, must persuade leaders of the three parties in his coalition government to accept the EU/IMF conditions for the 130-billion-euro ($170-billion) rescue.

“We must find a solution today,” said another government official. A third official said one of the main outstanding issues was the level of cuts on top-up, supplementary pensions.

Papademos is also due to meet Charles Dallara, who is negotiating on behalf of banks and insurers on a planned bond swap to ease Greece’s debt burden.

With Greece’s future in the euro zone in question, German Chancellor Angela Merkel said time was of the essence and there are growing signs that euro zone officials have lost patience.

They say the full package must be agreed with Greece and approved by the euro zone, European Central Bank and International Monetary Fund before February 15.

This is to allow time for complex legal procedures involved in a bond swap deal – under which the value of private investors’ holdings of Greek debt will be cut radically in value – so Athens can get rescue funds before March 20 when it has to meet heavy debt repayments or suffer a chaotic default.

“DON’T BOW YOUR HEADS!”

The funds come at the price of deeply unpopular wage and spending cuts that have infuriated ordinary Greeks struggling through the country’s fifth year of recession.

Scuffles broke out as protesting strikers tried to climb steps leading to parliament, chanting: “No to mediaeval labor conditions, don’t bow your heads, show resistance!”

Riot police rushed to block their way as some protesters sprayed red paint on the steps and a wall next to the tomb of the unknown soldier, which commemorates the fallen in past Greek campaigns. Other protesters burned a German flag and a Nazi flag.

Ceremonial guards in traditional Greek kilts, a top Athens tourist attraction, were evacuated and the protesters were pushed back on to the adjacent Syntagma Square, where riot police created a defensive line.

However, the turnout was noticeably smaller than at other protests in recent months, with heavy showers dampening the marchers’ spirits. “They were saved by the rain. The weather didn’t allow all protesters to take to the streets and show their anger,” Ilias Iliopoulos, general secretary of the public sector union ADEDY, told Reuters.

One civil servant watching the protests expressed a weary anger at the austerity imposed already, which has almost halved her monthly pay to 900 euros, and higher taxes.

“I wouldn’t mind paying for the next two years if I knew austerity would take us somewhere,” said 32-year-old Leto Papadopoulou. “But this crisis seems endless. In 10 years from now, I will be a lost case for the labor market.”

Early on Tuesday, the strike called by the private and public sector unions GSEE and ADEDY began to bite, bringing the country’s main port to a standstill.

“No ships departed from Piraeus port this morning, as a result of the seamen’s strike,” said a coast guard official.

In central Athens, tourists were locked out of the Acropolis and public transport was disrupted during the morning rush hour. State hospitals ran on a skeleton staff and teachers, bank employees and telecoms workers were due to join the action.

NOT AS FAR APART AS BEFORE

Finance Minister Evangelos Venizelos said earlier talks with the “troika” of lenders – the European Commission, ECB and IMF – were not going well. “Unfortunately the negotiations are so tough that as soon as one chapter closes, another opens,” he said after meeting troika officials on Monday night.

But a source close to the negotiations said that despite the complexity of the talks, especially on very unpopular labor reforms, Greece and its lenders were making progress.

“We are not as far from each other as we were before,” the official said, adding the two parties were working to finalize the outline of the “memorandum of understanding,” or policy program Greece needs to agree to in order to get the bailout.

With elections likely in April, the party political leaders – who Europe insists must all sign up to the austerity program – face an obvious incentive not to heap more misery on their voters. But if they do not, an unruly default looms.

After weeks of argument major issues have not been settled.

Greece has yet to identify spending cut measures worth 600 million euros this year, out of a total austerity package of about 3.3 billion euros, a government official said.

The troika was also demanding that private firms’ wage costs be cut by about a fifth to improve competitiveness. This would be done by reducing the minimum wage by as much as 20 percent or by scrapping some industry-wide wage bargaining agreements.

Jean-Claude Juncker, who chairs the group of euro zone finance ministers, backed a plan put forward by Merkel and French President Nicolas Sarkozy to set up a special escrow account into which Greece would make future interest payments as a means of guaranteeing that creditors were consistently paid.

However, Juncker denied that the euro was in danger because of the debt crisis. “The euro will outlive us all,” he told German Inforadio on Tuesday.

($1 = 0.7646 euros)

(Additional reporting by Yannis Behrakis, Renee Maltezou, Karolina Tagaris and Harry Papachristou and Gareth Jones in Berlin; Writing by Deepa Babington and David Stamp; Editing by Mike Peacock)

ATHENS (Reuters) – Greek party leaders face crunch talks on Tuesday to secure a new international bailout and avoid a chaotic debt default, caught between EU demands that they accept painful reforms now and a national strike against more austerity.

Prime Minister Lucas Papademos negotiated through most of the night with Greece’s European Union and IMF lenders, ending at 4 a.m. (0200 GMT) when the 24-hour strike was about to begin, closing ports and tourist sites and disrupting public transport.

Papademos, a technocrat parachuted in to lead the Greek government late last year, must persuade leaders of the three parties in his coalition government to accept the EU/IMF conditions for the 130-billion-euro ($170-billion) rescue.

“We must find a solution today,” said a government official before the leaders’ talks, which will start later in the day.

Another official said the government was preparing a text to put to the leaders for their approval, suggesting some movement in the process.

With Greece’s future in the euro zone in question, German Chancellor Angela Merkel said time was of the essence and there are growing signs that euro zone officials have lost patience.

They say the full package must be agreed with Greece and approved by the euro zone, European Central Bank and International Monetary Fund before February 15.

This is to allow time for complex legal procedures involved in a bond swap deal – under which the value of private investors’ holdings of Greek debt will be cut radically in value – so Athens can get rescue funds before March 20 when it has to meet heavy debt repayments or suffer a chaotic default.

“DON’T BOW YOUR HEADS!”

Scuffles broke out as protesting strikers tried to climb steps leading to parliament, chanting: “No to mediaeval labor conditions, don’t bow your heads, show resistance!”

Riot police rushed to block their way as some protesters sprayed red paint on the steps and a wall next to the tomb of the unknown soldier, which commemorates the fallen in past Greek campaigns. Other protesters burned a German flag.

Ceremonial guards in traditional Greek kilts, a top Athens tourist attraction, were evacuated during the scuffles.

The protesters were pushed back on to the adjacent Syntagma Square, where riot police created a defensive line.

However, the turnout was noticeably smaller than at other protests in recent months, with heavy showers dampening the marchers’ spirits. “They were saved by the rain. The weather didn’t allow all protesters to take to the streets and show their anger,” Ilias Iliopoulos, general secretary of the public sector union ADEDY, told Reuters.

One civil servant watching the protests expressed a weary anger at the austerity imposed already, which has almost halved her monthly pay to 900 euros, and higher taxes.

“I wouldn’t mind paying for the next two years if I knew austerity would take us somewhere,” said 32-year-old Leto Papadopoulou. “But this crisis seems endless. In 10 years from now, I will be a lost case for the labor market.”

Merkel told Athens on Monday to make up its mind fast if it would accept the deal, and its conditions of reforms to make the Greek economy more competitive that are certain to lead to big cuts in living standards.

Finance Minister Evangelos Venizelos said talks with the “troika” of lenders – the European Commission, ECB and IMF – were not going well. “Unfortunately the negotiations are so tough that as soon as one chapter closes, another opens,” he said after meeting troika officials on Monday night.

But a source close to the negotiations said that despite the complexity of the talks, especially on very unpopular labor reforms, Greece and its lenders were making progress.

“We are not as far from each other as we were before,” the official said, adding the two parties were working to finalize the outline of the “memorandum of understanding,” or policy program Greece needs to agree to in order to get the bailout.

TOURISTS LOCKED OUT

Early on Tuesday, the strike called by the private and public sector unions GSEE and ADEDY began to bite, bringing the country’s main port to a standstill.

“No ships departed from Piraeus port this morning, as a result of the seamen’s strike,” said a coast guard official.

In central Athens, tourists were locked out of the Acropolis and public transport was disrupted during the morning rush hour. State hospitals ran on a skeleton staff and teachers, bank employees and telecoms workers were due to join the action.

With elections likely in April, the party political leaders – who Europe insists must all sign up to the austerity program – face an obvious incentive not to heap more misery on their voters. But if they do not, an unruly default looms.

Greek party leaders face a general election possibly as early as April and have been reluctant to accept yet more austerity to be piled on top of a series of pay cuts, tax rises and job losses imposed since Greece’s first bailout in 2010.

After weeks of argument a number major issues have yet to be sorted out at Tuesday’s talks.

Greece has yet to identify spending cut measures worth 600 million euros this year, out of a total austerity package of about 3.3 billion euros, a government official said.

The troika was also demanding that private firms’ wage costs be cut by about a fifth to improve competitiveness. This would be done by reducing the minimum wage by as much as 20 percent or by scrapping some industry-wide wage bargaining agreements.

The troika also wanted top-up, supplementary pensions to be cut by about 15 percent on average to make the pension system financially viable, the official said.

On the markets, investors moved into the perceived safety of German government bonds, fretting over the Greek indecision. The euro held its ground against the dollar as most traders clung to hopes Greece would clinch the rescue, although nagging doubts kept the common currency in check.

Jean-Claude Juncker, who chairs the group of euro zone finance ministers, backed a plan put forward by Merkel and French President Nicolas Sarkozy to set up a special escrow account into which Greece would make future interest payments as a means of guaranteeing that creditors were consistently paid.

However, Juncker denied that the euro was in danger because of the debt crisis. “The euro will outlive us all,” he told German Inforadio on Tuesday.

($1 = 0.7646 euros)

(Additional reporting by Karolina Tagaris, Tatiana Fragou, Ingrid Melander, Harry Papachristou and Lila Chotzoglou in Athens, and Gareth Jones in Berlin; Writing by Deepa Babington and David Stamp; Editing by Mike Peacock)

ATHENS (Reuters) – Greek party leaders face crunch talks on Tuesday to secure a new international bailout and avoid a chaotic debt default, caught between EU demands that they accept painful reforms now and a national strike against more austerity.

Prime Minister Lucas Papademos negotiated through most of the night with Greece’s European Union and IMF lenders, ending at 4 a.m. (0200 GMT) when the 24-hour strike was about to begin, closing ports and tourist sites and disrupting public transport.

Papademos, a technocrat parachuted in to lead the Greek government late last year, must persuade leaders of the three parties in his coalition government to accept the EU/IMF conditions for the 130-billion-euro ($170-billion) rescue.

“We must find a solution today,” said a government official before the leaders’ talks, which will start later in the day.

Another official said the government was preparing a text to put to the leaders for their approval, suggesting some movement in the process.

With Greece’s future in the euro zone in question, German Chancellor Angela Merkel said time was of the essence and there are growing signs that euro zone officials have lost patience.

They say the full package must be agreed with Greece and approved by the euro zone, European Central Bank and International Monetary Fund before February 15.

This is to allow time for complex legal procedures involved in a bond swap deal – under which the value of private investors’ holdings of Greek debt will be cut radically in value – so Athens can get rescue funds before March 20 when it has to meet heavy debt repayments or suffer a chaotic default.

“DON’T BOW YOUR HEADS!”

Scuffles broke out as protesting strikers tried to climb steps leading to parliament, chanting: “No to mediaeval labor conditions, don’t bow your heads, show resistance!”

Riot police rushed to block their way as some protesters sprayed red paint on the steps and a wall next to the tomb of the unknown soldier, which commemorates the fallen in past Greek campaigns. Other protesters burned a German flag.

Ceremonial guards in traditional Greek kilts, a top Athens tourist attraction, were evacuated during the scuffles.

The protesters were pushed back on to the adjacent Syntagma Square, where riot police created a defensive line.

However, the turnout was noticeably smaller than at other protests in recent months, with heavy showers dampening the marchers’ spirits. “They were saved by the rain. The weather didn’t allow all protesters to take to the streets and show their anger,” Ilias Iliopoulos, general secretary of the public sector union ADEDY, told Reuters.

One civil servant watching the protests expressed a weary anger at the austerity imposed already, which has almost halved her monthly pay to 900 euros, and higher taxes.

“I wouldn’t mind paying for the next two years if I knew austerity would take us somewhere,” said 32-year-old Leto Papadopoulou. “But this crisis seems endless. In 10 years from now, I will be a lost case for the labor market.”

Merkel told Athens on Monday to make up its mind fast if it would accept the deal, and its conditions of reforms to make the Greek economy more competitive that are certain to lead to big cuts in living standards.

Finance Minister Evangelos Venizelos said talks with the “troika” of lenders – the European Commission, ECB and IMF – were not going well. “Unfortunately the negotiations are so tough that as soon as one chapter closes, another opens,” he said after meeting troika officials on Monday night.

But a source close to the negotiations said that despite the complexity of the talks, especially on very unpopular labor reforms, Greece and its lenders were making progress.

“We are not as far from each other as we were before,” the official said, adding the two parties were working to finalize the outline of the “memorandum of understanding,” or policy program Greece needs to agree to in order to get the bailout.

TOURISTS LOCKED OUT

Early on Tuesday, the strike called by the private and public sector unions GSEE and ADEDY began to bite, bringing the country’s main port to a standstill.

“No ships departed from Piraeus port this morning, as a result of the seamen’s strike,” said a coast guard official.

In central Athens, tourists were locked out of the Acropolis and public transport was disrupted during the morning rush hour. State hospitals ran on a skeleton staff and teachers, bank employees and telecoms workers were due to join the action.

With elections likely in April, the party political leaders – who Europe insists must all sign up to the austerity program – face an obvious incentive not to heap more misery on their voters. But if they do not, an unruly default looms.

Greek party leaders face a general election possibly as early as April and have been reluctant to accept yet more austerity to be piled on top of a series of pay cuts, tax rises and job losses imposed since Greece’s first bailout in 2010.

After weeks of argument a number major issues have yet to be sorted out at Tuesday’s talks.

Greece has yet to identify spending cut measures worth 600 million euros this year, out of a total austerity package of about 3.3 billion euros, a government official said.

The troika was also demanding that private firms’ wage costs be cut by about a fifth to improve competitiveness. This would be done by reducing the minimum wage by as much as 20 percent or by scrapping some industry-wide wage bargaining agreements.

The troika also wanted top-up, supplementary pensions to be cut by about 15 percent on average to make the pension system financially viable, the official said.

On the markets, investors moved into the perceived safety of German government bonds, fretting over the Greek indecision. The euro held its ground against the dollar as most traders clung to hopes Greece would clinch the rescue, although nagging doubts kept the common currency in check.

Jean-Claude Juncker, who chairs the group of euro zone finance ministers, backed a plan put forward by Merkel and French President Nicolas Sarkozy to set up a special escrow account into which Greece would make future interest payments as a means of guaranteeing that creditors were consistently paid.

However, Juncker denied that the euro was in danger because of the debt crisis. “The euro will outlive us all,” he told German Inforadio on Tuesday.

($1 = 0.7646 euros)

(Additional reporting by Karolina Tagaris, Tatiana Fragou, Ingrid Melander, Harry Papachristou and Lila Chotzoglou in Athens, and Gareth Jones in Berlin; Writing by Deepa Babington and David Stamp; Editing by Mike Peacock)

ATHENS (Reuters) – Greek leaders face crunch talks on Tuesday to secure a new international bailout and avoid a chaotic debt default, caught between EU demands that they accept painful reforms now and a national strike against more austerity.

Prime Minister Lucas Papademos negotiated through most of the night with Greece’s European Union and IMF lenders, ending at 4 a.m. (0200 GMT) when the 24-hour strike was about to begin, closing ports and tourist sites and disrupting public transport.

Papademos, a technocrat parachuted in to lead the Greek government late last year, must persuade leaders of the three parties in his coalition government to accept the EU/IMF conditions for the 130-billion-euro ($170-billion) rescue.

“We must find a solution today,” said one government official before the leaders’ talks, which are expected to start later in the day.

With Greece’s future in the euro zone in question, German Chancellor Angela Merkel told Athens on Monday to make up its mind fast if it would accept the deal – and its conditions of reforms to make the economy more competitive that are certain to lead to big cuts in living standards.

Finance Minister Evanagelos Venizelos said talks with the “troika” of lenders – the European Commission, European Central Bank and IMF – were not going well.

“Unfortunately the negotiations are so tough that as soon as one chapter closes, another opens,” he said after meeting troika officials on Monday night.

Early on Tuesday, the strike called by the private and public sector unions GSEE and ADEDY began to bite, bringing the country’s main port to a standstill.

“No ships departed from Piraeus port this morning, as a result of the seamen’s strike,” said a coast guard official.

TOURISTS LOCKED OUT

In central Athens, tourists were locked out of the Acropolis and public transport was disrupted during the morning rush hour. State hospitals ran on a skeleton staff and teachers, bank employees and telecoms workers were due to join the action.

Greek party leaders face a general election possibly as early as April and have been reluctant to accept yet more austerity to be piled on top of a series of pay cuts, tax rises and job losses imposed since Greece’s first bailout in 2010.

After weeks of argument a number major issues have yet to be sorted out at Tuesday’s talks.

Greece has yet to identify spending cut measures worth 600 million euros this year, out of a total austerity package of about 3.3 billion euros, a government official said.

The troika was also demanding that private firms’ labor costs be cut by about a fifth. This would be done by a combination of reducing the minimum wage by as much as 20 percent – a move that would drag the entire wage scale lower – by cutting holiday bonuses or by scrapping some industry-wide wage bargaining agreements.

Private sector workers currently receive holiday bonuses at Christmas, Easter and in the summer amounting to two months’ pay in total, although such benefits have already been cut for public workers.

The troika also wanted top-up, supplementary pensions to be cut by about 15 percent on average to make the pension system financially viable, the official said.

Merkel – whose government funds much of the bailouts for Greece despite public hostility at home – expressed exasperation at the endless arguing in Athens.

“I honestly can’t understand how additional days will help. Time is of the essence. A lot is at stake for the entire euro zone,” she said in Paris.

Jean-Claude Juncker, who chairs the group of euro zone finance ministers, also backed a plan put forward by Merkel and French President Nicolas Sarkozy to set up a special escrow account into which Greece would make future interest payments as a means of guaranteeing that creditors were consistently paid.

However, Juncker denied that the euro was in danger because of the debt crisis. “The euro will outlive us all,” he told German Inforadio on Tuesday.

EU officials say the full package must be agreed with Greece and approved by the troika before February 15 to allow time for complex legal procedures involved in the bond swap to be completed in time for a March 20 bond redemption.

In some euro zone countries, including Germany and Finland, parliamentary approval is required to raise the bailout money.

PATIENCE WEARING THIN

Greeks watched the political drama with the same exasperation they have shown throughout the nation’s nearly three-year crisis, mixed with fear of the consequences of leaving the euro.

“We are lost either way but political leaders have to agree,” said Kosmas Georgiou, a 31-year old company inspector. “Going back to the drachma is not an option, it’s disaster.”

“They are delaying this just to look like heroes.”

Papademos said after five hours of talks on Sunday that leaders of the conservative, socialist and far-right parties in his coalition had agreed cuts and other reforms worth 1.5 percent of gross domestic product this year.

However, how exactly these cuts will be achieved has yet to be thrashed out, and every time a method is proposed, troika officials have to calculate whether this would achieve the savings they demand.

($1 = 0.7646 euros)

(Additional reporting by Karolina Tagaris, Tatiana Fragou and Harry Papachristou in Athens, and Gareth Jones in Berlin, and Writing by Deepa Babington and David Stamp; Editing by Elizabeth Piper)