Greek public sector workers are staging a 48-hour strike in protest at austerity measures, including wage and pension cuts.

Their action comes ahead of tomorrow's nationwide general strike.

The austerity measures are being submitted in a draft bill to the Greek parliament and will be voted on by the end of the week.

They have been introduced in return for a €110bn rescue package from the EU and the International Monetary Fund agreed for the country.

European stock markets suffered heavy losses on fears that the fallout from the crisis might undermine other volatile eurozone states.

The ISEQ index plummeted 4.2% (142 points) to close at 3,255, with banks and airlines sharply lower.

The euro tumbled to a one-year low against the dollar today, as it fell below $1.31 for the first time since April 2009.

The Cabinet has approved the terms of Ireland's participation in the EU rescue package for Greece.

Legislation is now being drawn up to underpin the scheme and will be brought before the Dáil in the next few weeks.

Ireland will lend Greece €500m this year and up to €1.3bn in total over the next three years.

Finance Minister Brian Lenihan insisted that the State would make a profit out of the scheme, because Greece would pay more in interest than Ireland will pay on the borrowed money.

He also said the National Treasury Management Agency had sufficient funds on hand to loan the first tranche of money without further borrowing.

Fine Gael has called on the Minister to outline the details of the scheme to the Dáil tomorrow when it resumes after the Bank Holiday weekend.

Elsewhere, Spanish Prime Minister Luis Rodriguez Zapatero rejected the idea that Greece's economic crisis would prove contagious for the rest of the eurozone.

Austrian Finance Minister Josef Proell said yesterday that Europe is losing patience with Greece over the issue.

‘Regarding the protests in Greece, I, along with the rest of Europe, am near the end of my tether,’ Mr Proell said after the eurozone endorsed a huge rescue package to pull Athens out of a debt crisis.

Greece's government must make it clear to the population that austerity measures are absolutely necessary to help the country emerge from its crippling debt, he urged.

Athens has vowed a series of budget cuts and tax increases in exchange for an unprecedented bail-out by eurozone states and the IMF agreed on Sunday.

But the government's measures have come up against fierce opposition at home, with demonstrators staging a protest on the Acropolis and civil servants kicking off a two-day walkout.

Pensioners are also holding a separate demonstration.