By Renee Maltezou and Yannis Behrakis
ATHENS (Reuters) - Police fired tear gas at stone-throwing youths in central Athens on Wednesday, where thousands of striking state sector workers marched against cuts the government says are needed to save the nation from bankruptcy.
Youths broke up marble paving slabs and hurled the chunks of rock at police in full riot gear. The police responded by firing tear gas grenades, chasing the protesters through the square into surrounding streets.
Flights were grounded, schools shut and government offices closed in Greece's first nationwide walkout in months. Labour leaders call it the start of a campaign to derail emergency austerity steps launched last month by a government that has already imposed two years of tax hikes and wage cuts.
Greece's worsening debt crisis poses a risk to the euro currency and the international financial system. Reforms to Greek finances took on a new urgency this week after the government announced it would miss its 2011 deficit target.
Thousands of state workers, pensioners and students had gathered peacefully, beating drums and waving banners reading "Erase the debt!" and "The rich must pay." They marched into the square outside parliament where lawmakers were debating holding a referendum on the response to the fiscal crisis.
Reuters saw one bare-chested man covered in blood, rescued by bystanders after scuffling with demonstrators. Other protesters tried to storm an Economy Ministry building, shattering heavy glass at the entrance.
Police said at least two people were hurt. Still, violence was less serious than in June, when more than 100 people were injured in battles between demonstrators and police in Syntagma Square.
The strikes forced hospitals to run on emergency staff and the closure of some state schools. Trains were halted, and more than 400 international and domestic flights were canceled at Athens airport. The Athens Acropolis and major museums were shut.
Despite its new measures demanded by the EU and IMF, the government was forced to announce this week it would still fall short of its 2011 deficit target by nearly 2 billion euros, rattling global markets. Polls show nearly four of five Greeks expect a default on the massive national debt within months.
"We want this government out. They deceived us. They promised to tax the rich and help the poor, but they didn't," said Sotiris Pelekanos, 39, an engineer and one of the striking workers gathered in central Athens. "I don't care if we go bankrupt. We are already bankrupt."
Greece's main labor unions ADEDY and GSEE expect hundreds of thousands of people to walk off the job.
"They are not trying to save Greece. They are just killing workers," ADEDY Vice President Ilias Vrettakos said in a rally speech. "They should get the money from the rich, not from us."
Private sector workers did not participate in the strike but will take part in a bigger general strike on October 19. Many in the Greek private sector resent perks of state workers, who are protected from layoffs by the constitution.
SCRAMBLE TO PROTECT BANKS
Greece's announcement this week that it would not meet its 2011 deficit target has put in doubt the viability of a 109 billion euro bailout agreed in July -- the second huge bailout in two years. If that deal must be renegotiated, European banks that hold Greek debt could suffer a heavy blow.
EU officials are scrambling to protect banks from a repeat of the crisis that froze the world financial system in 2008.
They have postponed until mid-November a decision on whether to approve the next 8 billion euro ($10.7 billion) tranche of bailout loans, giving negotiators more time to press the government to enact promised reforms.
Finance Minister Evangelos Venizelos said on Tuesday Greek finances for this year could slip even further behind its target if the country failed to rally round the reforms and show "national cohesion and solidarity.
His government has promised to hold a referendum on the fiscal crisis this autumn but has not said what question Greeks would be asked. Parliament debated the referendum law on Wednesday as the protesters gathered outside.
The country's main labor unions, representing about half of Greece's 5 million-strong work force, have staged repeated strikes since Athens asked the European Union and International Monetary Fund for a first bailout last year. They say salary cuts, tax hikes and layoffs hurt the poor and prevent the economy from emerging from three years of recession.
"The government is panicking and has no strategy," said Thessaloniki port unionist Fani Gourgouri. "These measures are only extending poverty. We'd be willing to shoulder the cost and say 'yes' to austerity if they proceeded with reforms that would create jobs instead of cutting them."
(Additional reporting by Tatiana Fragou and Daphne Papadopoulou; Writing by Peter Graff)