THESSALONIKI, Greece - Greece's finance minister on Friday angrily denied rumours that the country faced possible default this weekend, as renewed uncertainty took a toll on the markets and thousands of police officers prepared for more mass protests over austerity measures.
Finance Minister Evangelos Venizelos alleged the rumours were an orchestrated, speculative attack against the euro -- "a game of very bad taste."
"It is not the first time that we see an organized wave of rumours about an upcoming Greek default," Venizelos said in a written statement. "Greece's fundamental choice and priority is to fully ... fulfil its obligations that derive from the agreements reached between Greece and its partners."
Greece is being kept financially afloat by two successive international bailout-loan deals totalling C219 billion ($302.6 billion). Despite nearly two years of austerity measures, the country faces growing pressure from European rescue creditors after missing its ambitious deficit reduction targets so far in 2011.
The default rumours, combined with the sudden resignation of senior European Central Bank official Juergen Stark, created fresh market distress that saw yields on Greek 10-year bonds surge to 21 per cent.
The austerity measures have not gone over well with the Greek public. Spending cuts and tax hikes in Greece have spurred a rapid rise unemployment, now at record levels of more than 16 per cent, adding to the anger.
Government spokesman Ilias Mosialos announced Friday that up to 20,000 civil servants could be suspended with reduced pay for up to a year, as the Socialist government battles to slash payroll costs.
"There is excess staff at some state-owned enterprises and elsewhere in the broader public sector ... they will become part of a labour reserve and receive 60 per cent of their salary," Mosialos told private Radio 9.
On Friday, more than 5,000 police officers began taking up positions in Greece's second largest city, Thessaloniki, where some 10 protest rallies are planned this weekend and where Prime Minister George Papandreou is to give an annual keynote speech Saturday on the state of the economy.
Shortly after his arrival, Papandreou was heckled by about 100 protesting municipal workers outside Thessaloniki City Hall, forcing him to enter the building using a side door.
Labour unions have held a series of general strikes over the past 18 months, accompanied by anti-austerity demonstrations that frequently turned into riots.
"We will all fight together to overturn the government's economic policies which have created injustice, poverty, joblessness and recession," Greece's largest union, the GSEE, said in a statement. "Bankers and big business created this crisis, and we are being made to pay for it by losing our jobs."
Late Friday, more than 1,000 police officers and firefighters staged an anti-austerity rally in Thessaloniki. Angry at pay cuts, they attended the rally in uniform, chanting "Don't push us into poverty." The march ended peacefully.
"The government has surrendered all sectors of public life to the country's creditors," Christos Fotopoulos, head of Greece's National Police officers' Association, told The Associated Press. "Everything is being demolished by austerity ... All our hopes of recovery have evaporated."
