THESSALONIKI, Greece – THESSALONIKI, Greece (AP) — Some 4,500 police are on duty Saturday in the northern Greek city of Thessaloniki as unions vow to hold rallies against possible new spending cuts by the government to cope with country's major debt crisis.
Prime Minister George Papandreou is due to speak about the economy on Saturday afternoon as his government faces a deepening recession and troubling unemployment figures. His government has already slashed pensions and civil service pay while raising consumer taxes, and on Friday it indicated more austerity lay ahead.
Unions have vowed to hold street protests before the prime minister's keynote speech at an annual trade fair — in the first major demonstration after months of strikes and protests halted over the summer.
Minor scuffles broke out Friday between riot police and protesting firefighters, while railway workers and left-wing unionists also held demonstrations.
Greece narrowly avoided bankruptcy in May, when European countries and the International Monetary Fund granted Athens emergency loans worth €110 billion ($140 billion) through 2012.
The government on Friday announced plans to overhaul the state-run rail company — in debt for €10.7 billion — by cutting payrolls and rail services. About 40 percent of its 6,300 workers will leave and be offered other public sector jobs, while the company faces private competition.
"This is a situation that cannot not be allowed to continue," Transport Minister Dimitris Reppas said after a Cabinet meeting in Thessaloniki. "We struggled in difficult circumstances so that there will not be a single dismissal."
Inspectors from the EU and IMF next week will review the progress of austerity measures required for the bailout loans, as well as on efforts to cut the budget deficit from 13.6 percent of annual output in 2009 to 8.1 percent this year.
Finance Minister George Papaconstantinou said the IMF on Friday approved its share of the second rescue-loan installment totaling €9 billion to paid out next week.
Greece remains off the market for government bonds — with interest rates at 9.6 percentage points higher than those for the benchmark German 10-year issue — leaving it to seek shorter-term loans.
The country's debt management agency said it would auction €900 million worth of 26-week treasury bills on Tuesday, in the first of a string of monthly short-term debt issues that replace quarterly sales.
Official data Friday showed Athens remains on track to meet its fiscal targets, although the rate at which the deficit is narrowing has slowed. And unemployment fell to 11.6 percent in June from 12 percent in May, according to Greece's statistics agency, defying an annual job surge over the summer tourist season.
The employment crisis has hit parts of northern Greece the hardest, including the town of Naoussa, where the jobless rate hit 50 percent, worsened by the relocation of factories of nearby Bulgaria.
"We have no hope. At this point we have nothing," said Ioanna Stoumbiari, and unemployed worker at a recently-closed textile factory in Naoussa.
"Who will hire me at 50? I want to work, but who will hire me? They're not hiring younger kids, they're going to hire me. I don't know what will happen."
Associated Press TV producer Theodora Tongas contributed to this report.