Greek Cabinet approves fresh austerity cuts

After the Cabinet's approval, the draft bill on austerity cuts must now be passed by the Greek parliament and approved by European finance ministers.

Five ministers have resigned from the government over the issue, with one junior party in the coalition saying the demands were "humiliating".

Unions began a 48-hour strike on Friday with protesters clashing with police. An estimated 17,000 union members and communists took to the streets of Athens on Friday, marching to mark the start of a two-day general strike.

Protesters also gathered near the parliament building. Some demonstrators threw stones and petrol bombs at police, who responded by firing tear gas. A small number of people from both sides suffered minor injuries.

The country is already reeling from the effects of an earlier round of austerity that followed a previous bailout - it is deep in recession, with unemployment rising above 20%.

Prime Minister Lucas Papademos has warned the country faces "uncontrolled economic chaos" if it fails to agree spending cuts and defaults on its debts.

"We cannot allow Greece to go bankrupt," he told his cabinet, saying it was an "hour of historic responsibility".

"A disorderly default would plunge our country in a disastrous adventure," he said.

Ministers who disagreed with austerity measures could not stay in the coalition government, the Greek leader added.

Deputy Foreign Minister Mariliza Xenogiannakopoulou, who quit on Friday afternoon, is the most senior defection so far.

Her Pasok party, the largest in the coalition, also suffered the loss of a deputy labour minister on Thursday.

The cuts package will be put to the vote in parliament on Sunday, with some MPs from the governing parties expected to vote against.

But analysts say the package should still have enough support in parliament, because Pasok and its other coalition ally New Democracy account for more than 230 deputies out of a total of 300.

The austerity cuts include:

• 15,000 public-sector job cuts
• liberalisation of labour laws
• lowering the minimum wage by 20% from 751 euros a month to 600 euros
• negotiating a debt write-off with banks.

These were presented to a eurozone ministers in Brussels on Thursday evening.

But they want a further €325 million in savings for this year and also insist that Greek leaders give "strong political assurances" on the implementation of the packages.