Petrol pumps run dry as Greeks strike over plans to tackle debt

Customs staff initially walked out for three days on Tuesday over salary freezes and cuts in bonuses. But their union has declared three 48-hour rolling strikes that will keep customs offices shut until next Wednesday, when all workers are being asked to join a general strike.

The customs walkout has hampered imports and exports but the supply of fuel has been the most badly hit.

Many service stations in Athens had run out of all fuel, while those that were still open were rationing supplies with a 20 limit per customer. Traffic police were called as cars queued for hundreds of yards.

Taxis also held a 24-hour strike over parts of an austerity package that increased fuel tax and will force them to issue receipts.

Greek unions have been opposing the new Socialist government's harsh austerity measures, which were imposed in an effort to pull the country out of its worst debt crisis in decades – one that has seen its deficit swell to a massive 12.7 per cent of economic output.

European finance ministers warned Athens this week that it would have to impose even tougher budget cuts if its current measures do not manage to reduce the deficit to 8.7 per cent this year. Athens has until March 16 to report back to the EU.

Meanwhile the Greek government said a complex debt deal with investment bank Goldman Sachs that has come under scrutiny by the EU was above board and will be explained.

The EU's top economy official Olli Rehn had demanded Greece supply answers on how it used transactions known as currency swaps and how that affected the country's debt and deficit figures.

"There will be a response. There is a letter by the Finance Minister," a government spokesman said, adding it would "most likely" be sent yesterday.

George Papaconstantinou's letter "will analyse the compatibility of those acts with EU regulations and (say) there is no problem, and that other countries have also carried out equivalent actions exactly because Eurostat accepted this until a certain time," said the spokesman, referring to the EU statistics agency.

Athens insists it stopped using the practice when the Eurostat rules changed.

Mr Rehn said this week that a "profound investigation" must be carried out, and that "if it turns out that there is such kind of securitisation of swaps that are not in line with the rules of the time, then of course we would need to take action."

The EU can take Greece to court, under threat of daily fines, to change its statistical methods. It is already threatening legal action for Greece's failure to report accurate public finance figures last year.

French Finance Minister Christine Lagarde said Eurostat was looking into "how a merchant bank, in this case Goldman Sachs, helped Greece structure, postpone a certain number of debt repayments."

Asked whether the bank had broken rules, the minister said: "That is the question that we have to ask ourselves and to which we need the answer. And I don't have that answer today."

"You have to know first of all whether it was doctoring the accounts and if this was legal or not at the time it was done. And if it was legal, it will be necessary to find out whether it was favourable for stability. Probably not."

Europe demands cuts to protect euro

Greece must reduce its massive deficit from 12.7 per cent of economic output to 8.7 per cent this year.

Athens has until March 16 to report back to the European Union on its progress.

Measures announced so far include higher taxes, increases in the average retirement age, a salary and public sector hiring freeze, and cuts in pay and bonuses.

EU countries which use the common euro currency have pledged to help if Greece cannot repay its debts but want Athens to make spending cuts first. They are taking action because fears of a Greek default could spark a wider European debt crisis.

If it fails, the finance ministers of the other 15 eurozone countries will vote on whether tougher action is needed and would impose extra measures such as raising VAT and energy taxes, setting new excise duties on luxury goods and new cuts to capital expenditure.

Market worries of a default have increased the cost of Greek government borrowing and caused the euro to slide to a near nine-month low.