Greece's private creditors signaled progress late Tuesday on a debt-relief deal but crucial talks between Greek coalition leaders about forcing more austerity upon a hostile public were again postponed.
Anger flared on the streets of Athens as more than 20,000 protesters marched through the Greek capital and unions called a general strike Tuesday against the new cuts in jobs and spending. The strike halted trains and ferries, closed down schools and banks and put state hospitals on short staffing.
Several hundred protesters clashed with riot police outside Parliament and set fire to a German flag _ upset over Germany's role in demanding more austerity from Athens.
"They are committing a crime against the country. They are driving wage-earners into poverty and wiping out pensioners and the unemployed," said Vangelis Moutafis, a senior member of Greece's largest union, the GSEE. "They are selling off state assets for nothing. This cannot continue."
Greek Premier Lucas Papademos delayed a meeting with his coalition parties till Wednesday, staying in talks until late in the night with top bank negotiators as well as with debt inspectors from the European Union and the International Monetary Fund.
Greece is under massive time pressure to secure a new euro130 billion ($170 billion) bailout from its partners in the euro and the IMF without which it will default in March on its massive debts.
Representatives of the Institute of International Finance, which has been leading the talks for private bondholders on forgiving Greece part of its debts, had a "constructive meeting" with Papademos, IIF spokesman Frank Vogl said.
Papademos and Finance Minister Evangelos Venizelos will soon brief the rest of the 17-nation eurozone on the proposed deal, Vogl said _ a sign the bond-swap deal could be close.
The meeting of eurozone finance ministers could happen as soon as Thursday in Brussels, according to officials, although that will depend on finding agreement in Athens on the terms of the second bailout.
Greece has been kept solvent since May 2010 by payments from a euro110 billion ($145 billion) international rescue loan package. When it became clear the money would not be enough, a second bailout was decided last October.
As well as passing new austerity measures, the second bailout depends on Greece's separate talks with banks and other private bondholders to forgive euro100 billion ($132 billion) in Greek debt. The private investors are expected to swap their current bonds for new bonds worth 50 percent less than the original face value, with longer repayment terms and a lower interest rate.
Without the new debt deals, Greece would face a disastrous default in late March.
The intense talks in Athens were supposed to be finished last weekend, but have dragged on over EU-IMF demands for a new round of austerity measures that include civil service job cuts and slashing Greece's minimum wage.
The Greek government has already accepted that it must cut 15,000 state jobs in 2012 to get the new bailout, as well cut 2012 spending by a further euro3.3 billion ($4.3 billion), reduce wage costs in the private sector and recapitalize banks without nationalizing them.
But disagreement remains between Greek lawmakers on the extent of those cuts.
A government official said Papademos' draft agreement on the austerity deal would be sent to Greek party leaders for scrutiny early Wednesday. "It took much longer than expected," the official told the AP, speaking on condition of anonymity due to the sensitivity of the talks.
The government's coalition partners _ the majority Socialists, main rival conservatives and the small right-wing LAOS party _ are also at odds over whether to go ahead with plans for an early election in April.
The Socialists, who handed over power to Papademos in November, want him to stay through parliament's four-year term that ends in late 2013, while conservatives are demanding an April vote.
LAOS leader George Karatazferis also criticized eurozone heavyweights France and Germany on Tuesday, saying they were carrying out an "aggressive humiliation of Greece" with all their demands for new austerity measures.
A disorderly bankruptcy by Greece would likely lead to its exit from the eurozone, a situation that European officials have insisted is impossible because it would hurt other weak countries like Portugal, Ireland and Italy.
But on Tuesday, the Neelie Kroes, one of the EU's 27 commissioners, said Greece's exit wouldn't be a disaster.
"It's always said: if you let one nation go, or ask one to leave, the entire structure will collapse. But that is just not true," Kroes told Dutch newspaper De Volkskrant.
She added that "Greece is not living up to its promises: too few savings, too few reforms ... It's becoming a Greek mantra: 'We cannot. We won't'!"
But EU Commission President Jose Manuel Barroso quickly stepped in to counter her remarks.
"We are in a very decisive moment regarding the future of Greece and the future of the euro. We want Greece in the euro," he said. "The costs of a default by Greece, the costs of a potential exit of Greece from the euro would be a lot higher than the costs of continuing to support Greece."
While Greece remains cut off from international bond markets _ where it would have to pay interest of about 35 percent to sell 10-year issues _ it maintains a market presence through regular short-term debt sales.
On Tuesday, Greek borrowing costs dropped slightly as the country raised euro812 million ($1.06 billion) in an auction of 26-week treasury bills. The interest rate was 4.86 percent, compared to 4.90 percent in a similar auction last month. The auction was 2.72 times oversubscribed.
Steinhauser reported from Brussels, Demetris Nellas and Nicholas Paphitis in Athens contributed to this report.