Greece shuts down for the day

By the BBC's Jonny Dymond, in Athens.

Greek Prime Minister George Papandreou has already faced down a three-week protest by farmers demanding higher government subsidies.

Public anger

On Tuesday, his socialist government announced that it intends to raise the average retirement age in a bid to save the cash-strapped pensions system.

The move comes on top of other planned austerity measures, including a public sector salary freeze and a hike in petrol prices announced last week.

Public sector workers here will not be hit as hard as they have been in Ireland, but they complain some of the poorest paid will suffer while the rich dodge tax with impunity, our correspondent says.

Further government measures include the non-replacement of departing civil servants, and tax collectors recovering billions of euros lost to tax evasion.

Biggest threat

Greece's deficit is, at 12.7%, more than four times higher than eurozone rules allow. Its debt is about 300bn euros ($419bn; £259bn).

The markets remain sceptical that Greece will be able to pay its debts and many investors believe the country will have to be bailed out.

The uncertainty has recently buffeted the euro and the problems have extended to Spain and Portugal, which are also struggling with their deficits.

The possibility of Greece or one of the other stricken countries being unable to pay its debts - and either needing an EU bailout or having to abandon the euro - has been called the biggest threat yet to the single currency.

The Dow Jones industrial average jumped back above 10,000 on hope that a resolution was near for Greece's debt crisis.

The Dow rose 150 points Tuesday, a day after closing below 10,000 for the first time in three months. The major indexes all gained more than 1 percent. Treasury prices slid as demand for safer investments fell.

Global markets bounced back on reports that plans are being developed in the European Union to rescue Greece. That raised hopes that policymakers will take bigger steps to contain debt troubles in other weak European economies including Portugal and Spain.

Though Greece's economy is small, that country's yawning budget gaps were undermining faith in the euro, Europe's common currency. Investors also believed that other countries might have trouble raising money in debt markets, which would hamper efforts to get their economies going again.

World stock markets have been tumbling in recent weeks on concerns that debt problems would spread. The euro is still down about 5 percent for the year, but rose for a second day against the dollar as the outlook improved for Greece.

Greece took steps Tuesday to calm markets, pledging to slash spending and raise fuel taxes.

The European debt problems are the latest obstacle to trip up the stock market after 10 months of steep gains. Stocks began retreating in mid-January after China said it would try to control its economy to avoid speculative bubbles. Things got worse when President Barack Obama announced plans to curb trading by large financial institutions.

"There's some euphoria that maybe it's not going to be blowing up," said Erik Davidson, managing director of investments for Wells Fargo Private Bank in Carmel, Calif., referring to easing fears over Greece. Davidson said some of the market's slide had been over concern that stocks had risen too far. The problems in Greece provided a handy excuse to sell, he said.