Greek Prime Minister George Papandreou said Wednesday he would seek a confidence vote as thousands besieged parliament against new austerity cuts and debt-hit Athens teetered on the brink of default.

A protester runs next to a tear gas canister during a demonstration near the parliament in the center of Athens.

Papandreou also said he would reshuffle the government after an offer to the opposition to join the government was apparently spurned by the conservatives.

"Tomorrow I will form a new government and will immediately ask for a vote of confidence in parliament," Papandreou said in a televised address. "I will continue on the same road, the road of duty."

The announcement came after feverish media speculation that the prime minister had offered to resign if it could help secure an agreement with the conservatives on a unity government to tackle the debt crisis.

State television NET and other media had earlier reported that Papandreou had made the proposal to opposition conservative leader Antonis Samaras to secure backing for new controversial reforms required to secure another debt bailout.

The prime minister did not indicate the extent of the reshuffle, which comes as the government prepared to push through parliament a controversial new wave of cuts required to clinch another EU-IMF bailout for Greece.

Greece has warned it will be unable to pay next month\'s bills without a 12-billion-euro loan instalment from the EU and the IMF, part of a broader 110-billion-euro bailout package agreed last year.

But the creditors have warned that no more aid will be forthcoming without firm reform commitments from Athens.

Many Greeks are angry that additional sacrifices are demanded after billions of euros in spending cuts and tax hikes last year.

Some 40,000 people, according to media estimates, demonstrated in Athens on Wednesday in a protest timed to coincide with a crippling general strike, the third this year against the austerity cuts. They also ringed parliament.

Police fired tear gas as clashes with protestors left at least 40 injured, health services and the police said.

Another 20,000 people gathered in the main northern city of Thessaloniki, police said.

Sixteen people were arrested after the violence.

The show of force in Athens was organised by a protest group that has peacefully occupied the central Syntagma Square, where parliament is located, for weeks, modeled after a similar anti-government mobilisation in Spain.

The demonstrations were initially peaceful, with only sporadic scuffles breaking out at barricades put up by police around parliament.

But the violence escalated when scores of hooded youths began throwing stones, bottles and firebombs at riot police, who responded with heavy discharges of tear gas.

The ambulance service said some 30 people, including a prominent television journalist, had been injured, and the police department said ten of its own officers were also hurt, some seriously.

"We have two-three officers who are in a serious condition," police spokesman Thanassis Kokkalakis told private Skai TV.

"One of them was hit in the ear by a flare and another has lost a number of fingers on his hand," he said, adding that two people had been arrested.

The protest was designed to turn up the heat on the government on a day when public transport and key services were paralysed by the general strike.

Papandreou had earlier held an emergency meeting with President Carolos Papoulias, the day after the government\'s parliamentary majority was reduced to just five seats by a lawmaker\'s defection.

Lawmakers were debating a new austerity package worth over 28 billion euros ($40 billion), a condition demanded by Greece\'s creditors in return for a badly-needed new aid bailout.

The plan is to be voted on by the end of the month.

A similar economic bailout in Portugal prompted the collapse of a Socialist government followed by snap elections that were won by a centre-right party.

Eurozone finance ministers failed to reach accord at talks on Tuesday on a second bailout package to avert a possible Greek default.