Greek strikers hurl yoghurt and stones at Athens police

Greek police have fired teargas at protesters outside parliament as MPs prepared to debate new austerity measures required for the EU and IMF bail-out package.

Demonstrators who broke off from a strike rally in Athens responded by throwing yoghurt and stones.

Prime Minister George Papandreou faces the risk of a revolt in his Pasok party over the austerity package.

He has proposed a unity government to pass the measures, state TV reports.

He is seeking support for a new austerity programme of 28bn euros (£24.6bn; $40.5bn) in cuts to take effect from 2012 to 2015.

Thousands are taking part in a general strike, the third in Greece this year.

Ports, public transport and banks have been badly disrupted as the main public- and private-sector unions go out on strike.

State-run companies have also joined the walkout, while hospitals are only offering emergency care. However, airports are operating normally after air traffic controllers called off their strike.

A top credit agency has cut Greece's rating, making it the least credit-worthy nation out of 131 countries it monitors.

The Greek government said the downgrade by Standard & Poor's - from B to CCC - ignored its efforts to secure funding.

In order for the next tranche of rescue loans to go through, parliament must adopt the new austerity plan by the end of June.

'Fight the battle'

Police thwarted protesters who were attempting to blockade parliament and stop MPs getting in for the debate.

They sealed off the roads leading to Syntagma Square and created a pathway for deputies.

The Greek demonstrators are calling themselves the "indignants", linking themselves to Spanish anti-austerity protesters who set up camps in Madrid and Barcelona.

The square is awash with Greek and Spanish flags, as well as banners reading "Resist" and the battle cry from the Spanish civil war, "No pasaran" (they shall not pass), the AFP news agency reports.

One MP defected from Mr Papandreou's Pasok party on Tuesday, leaving it with only 155 of the chamber's 300 seats.

"You have to be as cruel as a tiger to vote for these measures. I am not," George Lianis, a former sports minister, said in a letter to parliament's speaker announcing his departure from the parliamentary group.

At least one other Pasok MP has threatened to vote against the new programme of cuts and privatisation of state assets.

Another 14 MPs are wavering in their support for the austerity plan, our correspondent says.

Mr Papandreou held talks on Wednesday with Greek President Karolos Papoulias, telling him that "a national effort" was required.

"We are at a historically crucial moment and a time of crucial decisions," Mr Papandreou said, according to a transcript released by his office.

"In any case, we will move forward with this sense of responsibility and the necessary decisions."

Possible contagion

Meanwhile, eurozone finance ministers have failed to agree on how to make private creditors contribute to a possible second Greek bail-out.

Ministers meeting in Brussels continued their discussions late into the night on Tuesday on ways of making private bondholders share the cost of a second rescue package without throwing financial markets into turmoil.

As a result of their failure to reach a deal, the cost of insuring Greek debt against default shot to an all-time high.

In a sign of possible contagion from the Greek crisis, credit rating agency Moody's said it might downgrade the three largest banks in France because of their exposure to Greek debt.

Share prices for BNP Paribas, Credit Agricole and Societe Generale all fell as a result.

France appealed for calm, saying it opposed a Greek restructuring which could entail write-offs for private banks.

"The French position is voluntary - no restructuring, no credit event and in line with the ECB," government spokesman Francois Baroin told reporters in Paris.

The EU and IMF are demanding the measures in return for the release of another 12bn euros in aid next month which Athens needs to pay off maturing debt.