By Simon Miller

The Greek austerity agreement has now cost the government six members following the resignation of deputy foreign minister Marilisa Xenogiannakopoulou.

Xenogiannakopoulou is the second socialist government official to resign and follows the decision of right-wing party LAOS to leave the government.

The resignations will lead to a reshuffle in the government following extended talks which led to it presenting further austerity measures to the Europan Union which included 15,000 public-sector job cuts, liberalisation of labour laws and lowering the minimum wage by 20%.

However, eurozone ministers told Greek officials that they wanted a further €325m in cuts prompting the resignations.

LAOS leader George Karatzaferis told a news conference: "Greeks cannot be hostages and serfs. We were robbed of our dignity, we were humiliated. I can't take this. I won't allow it, no matter how hungry I am."

He added: "Germany decides for Europe because it has a fat wallet and with that fat wallet it rules over the lives of all the southern countries."

The Socialist party pleaded with parliamentarians to vote for the austerity measures following the wlakout by LAOS.

"In the crucial parliamentary votes ahead, the national interest requires a responsible stance and positive vote by all lawmakers so that the country can safely get out of the crisis," PASOK party spokesman Panos Beglitis said in a statement.

As riots broke out in Athens, the Federation of Greek Police threatened the 'troika' with arrest warrants accusing them of balckmail according to a letter leaked to Reuters.

Targeting the International Monetary Fund's top official for Greece Poul Thomsen, the union wrote: "Since you are continuing this destructive policy, we warn you that you cannot make us fight against our brothers. We refuse to stand against our parents, our brothers, our children or any citizen who protests and demands a change of policy.

"We warn you that as legal representatives of Greek policemen, we will issue arrest warrants for a series of legal violations ... such as blackmail, covertly abolishing or eroding democracy and national sovereignty."

Markets reacted negatively to the news with the FTSE 100 down 37.17 points at 5,858.30, CAC 40 at 3,385.12 - down 39.59 while the S&P 500 opend down 11.79 at 1,340.16 (16.15 GMT).

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