By Harry Papachristou and Ingrid Melander
ATHENS (Reuters) - The Greek government said on Friday it would not bow to domestic opposition to EU/IMF demands for tax hikes and public sector wage cuts, saying the country needed austerity to survive.
The debt-choked country is hoping to conclude within days a deal with EU and IMF officials on more than 20 billion euros (17.4 billion pounds) worth of deficit-cutting measures in order to get access to a multi-billion-euro aid package and avoid default.
"The economic measures we must take ... are necessary for our country's protection, for our future, for us to be able to stand on our feet," Prime Minister George Papandreou told parliament. "Today the top priority is the survival of the nation. This is the red line."
Union officials said Greece was asked to slash its deficit by 10 percent of GDP in 2010-2011 by raising VAT tax, scrapping public sector bonuses amounting to two extra months pay, and freezing civil servants' wages in exchange of getting the aid.
The public sector union called for a 4-hour work stoppage for Tuesday, on top of a nationwide strike already set for Wednesday, to protest the belt-tightening. Both private and public sector unions have said they would step up protests.
Leftist parties oppose resorting to the IMF and the main opposition party, the conservative New Democracy, said austerity measures would further deepen the recession.
Finance Minister George Papaconstantinou said the government would not wilt under pressure to reject a deal, in a country where many reforms have been scrapped in the wake of street protests.
"No one should doubt our will to clash with vested interests, big or small, to achieve the national goal," the minister told a conference. "We will not back down, we will not bow to any political cost."
Papandreou called for a meeting of the country's political party leaders to discuss the deal, his office said on Friday, as the government insisted it had no choice but to tap the aid.
"High interest rates ... have made it impossible to borrow on international markets," Deputy Finance Minister Philippos Sachinidis told parliament. He added that the aid package would offer Greece up to 120 billion euros for a three-year period at reasonable interest rates.
STRIKES AND PROTEST
The Socialist government, elected in October on a promise to tax the rich and help the poor, has already announced three sets of austerity steps since revealing last year that the budget deficit had shot up to more than twice previous forecasts.
Economists warn that the austerity undertakings risk further worsening recession this year, with forecasts exceeding last year's 2.0 percent GDP decline.
Moody's cited this concern as a factor in its decision to cut the ratings of nine Greek banks on Friday.
"The acute economic strain facing Greece is materially impacting the banking sector's financial condition, requiring it to be further supported," the firm said in a statement.
Economists said uncertainty over the economy would also hurt consumer spending. Retail sales by volume rose marginally by 1.7 percent year-on-year in February, thanks to a protracted sales season, the national statistics office said on Friday.
"Consumer spending is expected to fall sharply in the coming months as sentiment is revisiting historic lows because of the high uncertainty over the short-term outlook of the economy," said Nikos Magginas at National Bank of Greece.
Opinion polls show a majority of Greeks oppose resorting to the IMF and disagree with the sacrifices.
"I don't think these measures will get us out of the crisis. There is no salvation for Greece," said Vassilis Fragiskakis, 32, a glass factory owner.
Fragiskakis' factory, which employees 35 people, has seen business go down in the last two months.
"The situation is very difficult. The reason we haven't fired anyone is that we see these people as our family. But in the last two months we can barely make enough to pay their salaries," he said. "It's tragic."
(Additional reporting by Renee Maltezou, Angeliki Koutantou, Dina Kyriakidou, George Georgiopoulos and Tatiana Fragou; Writing by Ingrid Melander; Editing by Mark Heinrich)
