The Greek government announced fresh austerity measures late on Wednesday, after Greece's Finance Minister Evangelos Venizelos insisted earlier in the day that his country had no plans to abandon the euro and would do everything in his power to stay in the eurozone.

Greece is and will forever be a member of the eurozone, he said.

"We will do anything, we will not place at risk the fate of the country and its place in the eurozone."

However, Venizelos added that the country did need additional austerity measures. Later on Wednesday, the government said it would cut pensions above 1,200 euros ($1,650) and lay off 30,000 public sector workers temporarily, until an independent commission decides whch posts will definitely be cut.

The threshold on income-tax free allowances is to be lowered from 8,000 euros to 5,000 euros. Wages will also be cut in the public sector.

It comes after Venizelos said Athens needed the help of its international lenders, who have imposed a string of unpopular tax increases, pension cuts and economic reforms as a condition for more bailout funds.

Auditors from the European Union, the European Central Bank and the International Monetary Fund, the so-called troika, have imposed increasingly strict budget measures on the Greek people.

But, Venizelos admitted, "If it wasn't for the troika's control... unfortunately we would have derailed fiscally."

New strikes announced

But the prospect of more tax increases and spending cuts was met with fierce resistance on Wednesday.

Greece's two largest labor unions announced further strike action.

The EU and the eurozone face enormous political, institutional and economic problems: Venizelos

The main private sector union GSEE and the ADEDY syndicate, which represents civil servants, called a general strike on October 19 and a nationwide civil service strike on October 5.

"We will fight to the end, to topple this policy," Ilias Iliopoulos, general Secretary of ADEDY told Reuters. "The troika [EU, IMF and the ECB] and the government must go."

ADEDY and GSEE, who represent about half of the country's workforce, have staged repeated strikes in response to demands from international creditors for increasingly harsh austerity measures.

But the European Commission revealed on Tuesday that a conference call between Greek officials and their international creditors had yielded "good progress."

Tentative signs of progress

Auditors agreed overnight to resume work on whether to release rescue funds to avert a Greek default. They urged Athens to speed up its reform drive before they release the next disbursement of bailout funds.

The first bailout, handed out last year, totaled 110 billion euros ($150 billion). A second bailout of 159 billion euros, agreed on July 21, has been held up by disagreements within the EU.

At a meeting in Poland on Saturday, EU finance ministers agreed to delay their decision to release the next eight-billion-euro tranche of the first bailout until October.

German Chancellor Angela Merkel is expected to hold talks with her Greek counterpart George Papandreou next Tuesday to discuss the progress of fiscal reforms.

The talks will focus on "the state of the Greek economy, the drive towards budgetary consolidation and the implementation of the Greek reform program," Merkel's spokesman Steffen Seibert told reporters on Wednesday.

Greece needs the next bailout installment to avert default next month.

Author: Sarah Harman, Charlotte Chelsom-Pill (AFP, Reuters, AP)

Editor: Nicole Goebel