A civil servants' strike grounded flights and shut down public services across Greece on Wednesday, as labor unions mounted their first major challenge to austerity measures in the debt-plagued country.

Air traffic controllers, customs and tax officials, hospital doctors and schoolteachers walked off the job for 24 hours to protest sweeping government spending cuts that will freeze salaries and new hiring, cut bonuses and stipends and increase the average retirement age by two years.

"Today, the workers give their reply," loudspeakers blared in the capital's central Syntagma Square, where hundreds of pensioners and striking workers began gathering ahead of demonstrations planned later in the morning.

The strike has left state hospitals working with emergency staff only, while national rail travel was also disrupted, although urban mass transport was unaffected.

"It's a war against workers and we will answer with war, with constant struggles until this policy is overturned," said Christos Katsiotis, a representative of a communist-party affliated labor union.

Greece has come under intense pressure from its European Union partners to slash spending after it revealed a massive and previously undeclared budget shortfall last year that continues to rattle financial markets and the euro, the currency shared by 16 EU members.

Prime Minister George Papandreou, who was in Paris Wednesday to discuss the economic crisis with French President Nicolas Sarkozy, has repeatedly said the country will sink under its debt unless everyone contributes to a solution.

But labor unions are unconvinced, and on Wednesday they ended weeks of caution after Papandreou's new Socialist government deepened cuts, slashing early retirement rights and even tapping the country's powerful Orthodox Church for more taxes.

"It wasn't the workers who took all the money, it was the plutocracy. It's them who should give it back," said Alexandros Potamitis, a 57-year-old retired merchant seaman.

The government has insisted that those on low incomes will be protected and will even enjoy lower taxes, with the austerity plan targeting the better off.

Finance Minister George Papaconstantinou announced another round of austerity measures Tuesday night, just before Wednesday's strike: adding 0.14 euro (19 U.S. cents) in taxes to the price of a liter of regular unleaded gasoline, and announcing plans to oblige all Greek businesses — including gasoline stations, cab drivers and vendors at farmers' markets — to issue receipts.

Resistance is mounting nonetheless. The umbrella civil servants' union that called Wednesday's 24-hour strike, ADEDY, has said it will decide later this week on further strike action.

Greece's largest labor organization, the umbrella GSEE union, has called a separate one-day strike on Feb. 24.

"I don't care about the (country's) problems. I didn't steal a single euro, why should I pay?" said Christos, an elderly man who said he retired after working for 47 years and was now barely surviving on a pension of 640 euros ($880) a month.

He refused to give his surname, saying he was afraid he would lose his pension if he complained openly.

It remains unclear whether the protests will represent the start of a serious labor backlash against the urgent reforms or a demonstration of union dissatisfaction in a country where strikes are common.

Papandreou's Socialists came to power in early elections last October, drumming the Conservative party in the polls, and they now enjoy a strong majority of 160 seats in the 300-member Parliament, compared to the main opposition's 91.

Papandreou has already faced down a protest by farmers, who demanded higher subsidy payments and staged tractor blockades on Greek highways for nearly three weeks, ending Tuesday.

Markets have also reacted positively on indications that wealthy European countries are closer to rescuing Greece. Stocks in Europe and the United States rose Tuesday on expectations of some kind of decisive action to prevent a Greek debt default that could spread to other countries, undermining Europe's hesitant economic recovery.

European Union leaders are to discuss the issue during a summit in Brussels Thursday, and officials have said they will issue a statement on Greece. Markets have reacted well to news that European Central Bank President Jean-Claude Trichet would make a rare appearance at the summit in Brussels — which they saw as confirmation that some kind of help would be discussed.

The Athens Stock Exchange opened up Wednesday, with the general price index up 3.23 percent in midmorning trading, a day after closing up 4.96 percent.

The spread between 10-year Greek government bonds and the benchmark German issues of equivalent maturity continued to fall, suggesting fears of a default receded.

The spread stood at 272.2 basis points, down from about 320 basis points late Tuesday.