Greece acknowledged it was having trouble persuading its foreign lenders to accept a plan to save nearly €12 billion over the next two years.

The plan is essential to unlocking the aid payments the country needs in order to avoid bankruptcy.

Hopes that Greece, now in its fifth straight year of recession, might get a quick green light on the package were dashed when inspectors rejected part of it after talks resumed yesterday.

There appeared to be little progress at a second round of talks today between Prime Minister Antonis Samaras and the Troika of inspectors from the European Commission, the European Central Bank and the International Monetary Fund.

Troika officials rejected some of the proposed measures to cut public sector expenses and wanted a bolder plan to reduce the number of civil servants, a senior Greek official said.

Slashing public sector jobs is a highly sensitive subject in Greece, where the constitution bars firing civil servants.

Athens' proposed austerity package includes a controversial plan for a "labour reserve" in which civil servants get reduced pay before being laid off, but the scheme only targets savings of €167m over 2013 and 2014, a draft of the plan showed.

Mr Samaras will struggle to toughen the austerity package any further without running into stiff opposition from the junior partners in his fragile three-party coalition, which has squabbled for weeks over the proposed cuts.

The allies - who are under pressure from their voter base to water down the package - have already warned Troika officials against pushing austerity too far, saying that low-income pensioners and civil servants must be spared.

Partly due to steep austerity measures taken since its first bailout two years ago, the Greek economy is expected to contract by about a fifth in the 2008-2012 period, making this the country's worst post-war recession.

Unemployment has soared to a record high, with almost one in four without a job.

Angry pensioners, policemen, judges and civil servants, expected to be particularly hurt by the cuts, are readying strikes and demonstrations to signal their opposition.

In the first major protest, about 15,000 trade unionists and leftists marched on Saturday at an annual fair in Greece's second biggest city Thessaloniki.

Last week, about 4,000 police, coastguards and firemen staged faked suicides on gallows they placed outside the finance ministry and parliament to symbolise the pain of budget cuts.

Mr Samaras is also under pressure from his other ally, Socialist Pasok chief Evangelos Venizelos, who wants him to stick to a pre-election pledge to obtain two more years' grace from the Troika to implement the cuts slated for 2013 and 2014.

However, Mr Samaras has pledged to first deliver on commitments in the bailout before seeking any concessions.

Greece faces bankruptcy and a potential eurozone exit without the next tranche of aid, an issue that European leaders are expected to decide on next month.