ATHENS: Greek trade unionists take to the streets Thursday in a show of force against austerity measures, one day after the government's plans to tame spiralling debt suffered a blow from a fresh credit rating downgrade.

International ratings agency Standard and Poor's (S&P) lowered Greece's long-term credit rating to BBB+ from A- and warned it could drop the level further unless the government manages to get its finances in order soon.

Prime Minister George Papandreou unveiled emergency cost-cutting measures at the beginning of the week as his new Socialist government tries to get a grip on the country's public finances crisis and avoid a default.

But these took a knock on the chin on Wednesday when S&P said Greece's cost-cutting plans "are unlikely, on their own, to lead to a sustainable reduction in the public debt burden."

The reaction to the news on financial markets was swift and sharp, with the European single currency that Greece shares with 15 other countries falling to 1.4506 dollars from 1.46 dollars before the announcement.

The BBB+ rating is still considered investment-grade but is below the European Central Bank's standard requirements. Another credit rating agency, Fitch, downgraded Greece to BBB+ from A- last week.

Greece's public deficit is set to rise to 12.7 percent of output this year, far above the eurozone limit of 3.0 percent. The debt is also expected to rocket up to 113 percent of output in 2009 against an EU target of 60 percent.

S&P said reforms to cut public spending face "domestic obstacles that would likely require sustained efforts over a number of years to overcome," it added.

The government will get a taste of that on Thursday when school teachers, state hospital doctors, dock workers and journalists walk off the job in protest against cost-cutting measures.

Demonstrations are expected to be held in dozens of cities across Greece.

Papandreou has promised curbs on public sector hiring and pay, a 10 percent cut in civil servant benefits, a reduction in military spending, a 90 percent tax on bonuses at banks and an overhaul of the fiscal system.

Greek Finance Minister George Papaconstantinou, who has met with his British, French and German counterparts on a tour of European capitals this week in a bid to calm fears, is set to meet institutional investors in Frankfurt on Thursday.

Papaconstantinou has said Greece is prepared to do "what it takes" to regain international trust in its economy but warned: "Credibility takes time to build and the window of opportunity is very small."

The markets have also been sceptical of the Greek government's cost-cutting plans and the yield difference, or spread, between Greek and German government bonds has shot up this week, meaning that Athens needs to offer higher interest rates to attract fresh loans.

"We think that volatility of Greek spreads is likely to persist until the government effectively implements measures," analysts from French bank BNP Paribas said in a note to investors.

But the bank expressed the view that a Greek default "is not the most likely scenario" given the support likely from Greece's European partners anxious to avoid a potentially fatal blow to the euro currency zone.