* Greek anger responds to European lenders' mistrust
* Police fire teargas as protesters throw petrol bombs
* Far-right coalition party says cannot vote for austerity
* Police union refuses to fight "our brothers"
* Austerity plan likely to pass parliament despite defections
By Karolina Tagaris and Harry Papachristou
ATHENS, Feb 10 (Reuters) - Striking Greek workers denounced a new wave of austerity on Friday as an imposition too far by Europe and the IMF. Finance Minister Evangelos Venizelos told the nation it faced a stark choice between sacrifices inside the euro area and bigger sacrifices outside.
Police fired teargas at black-masked protesters who threw petrol bombs, stones and bottles in central Athens at the start of a 48-hour general strike against planned pay and job cuts. But street protests were relatively small and mostly peaceful.
The biggest police trade union said it would issue arrest warrants for Greece's international lenders for subverting democracy, and refused to "fight against our brothers". A daily newspaper depicted German Chancellor Angela Merkel in a Nazi uniform with a swastika armband.
As public rage simmered, the leader of the far-right LAOS movement, the smallest of three parties backing Prime Minister Lucas Papademos, said he would not vote for the harsh austerity programme in a crucial parliament vote due on Sunday or Monday.
"Greeks cannot be hostages and serfs," LAOS leader George Karatzaferis told a news conference. "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."
"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."
His party has 15 deputies in the 300-seat parliament, dominated by the socialist PASOK and conservative New Democracy parties, which both support the Papademos government.
LAOS' four ministers tendered their resignation, but Karatzaferis rejected calls for an early general election and suggested the prime minister appoint more technocrats instead.
Venizelos made clear Greece has little choice but to accept the harsh conditions attached to a 130 billion euro bailout, and a plan to halve its huge debt to private bondholders, to avoid a chaotic default when big bond repayments come due next month.
"It's time for us to make up our minds," he said after euro zone finance ministers refused to give immediate approval to the bailout plan. "Unfortunately, we have to choose between sacrifices and even bigger sacrifices."
The European Union and IMF have been exasperated by a series of broken promises and weeks of disagreement over the terms of the bailout, which would be Greece's second since 2010, with time running out to avoid a default.
The ministers gave Athens six days to prove its commitment by passing key legislation, finding an extra 325 million euros in savings, and providing assurances that the programme will remain in force after any election.
Summing up their deep mistrust, Jean-Claude Juncker, chairman of euro zone finance ministers, said: "In short, no disbursement before implementation."
The euro and European shares fell, reflecting concern that the Greek bailout and debt swap could fail.
The austerity plan includes lowering the minimum wage by 22 percent, axing 150,000 public sector jobs and reducing pensions.
Some protesters compared Greece's plight, facing bankruptcy unless it accedes to the demands of international lenders, to its seven years under military dictatorship.
On Syntagma Square in central Athens, songs from the struggle in the 1960s and 1970 against a junta of colonels boomed out over loudspeakers.
Police said three policemen and two protesters were slightly injured in clashes. Five people were detained.
With Greece probably at its lowest ebb since the junta was overthrown in 1974 and democracy restored, protesters denounced the "troika" of lenders - the European Commission, European Central Bank and International Monetary Fund.
"Do not bow your heads! Resist!" They chanted. "No to layoffs! No to salary cuts! No to pension cuts!
Even the police, who have repeatedly clashed with protesters since the crisis broke out more than two years ago, announced resistance to the creditors' demands.
"As we can see you are continuing this destructive policy, so we warn you that you cannot make us fight against our brothers," the Greek Police Federation said in an open letter to the troika.
"We warn you that as legal representatives of the Greek police, we will issue arrest warrants for a series of legal violations ... such as blackmail, covert abolition or erosion of democracy and national sovereignty."
Papademos announced on Thursday that the three parties in his coalition government had agreed to the austerity and reform package.
However, Venizelos failed to persuade his euro zone peers to approve immediately the deal and an accompanying bond swap, which will cut the value of the debt held by Greece's private creditors by about 70 percent.
A FINAL CHOICE
The finance minister made clear that the fate of the package and the PSI (Private Sector Involvement) bond swap depended on what Greece decided in the next few days.
"Until the next Eurogroup which will most likely convene on Wednesday, our country, our people should think and make a final strategic choice," he said.
"If we see the future of our country within euro zone, within Europe, we should do what we have to do for the programme to be approved and for the PSI to be concluded on time before major bonds expire in March."
Resistance is growing among nervous lawmakers who must face the electorate shortly.
The socialist deputy labour minister resigned in protest on Thursday while about 35 socialist deputies called for measures to ease the effects of the new austerity.
According to Athens News Agency, socialist lawmaker Pavlos Stasinos resigned on Friday and news websites reported that another deputy was threatening to quit. However, only mass defections would sink the package in parliament.
"There will most likely be a string of defections and abstentions but I don't believe that the measures will fall short of the majority required," political analyst George Sefertzis told Reuters. "Voting for them will be painful for MPs, but assuming responsibility for a bankruptcy would be as onerous, if not more so."
In Friday's strike, ships were stuck in Piraeus port and public transport halted but flights were not affected. Hospital doctors and bank employees also walked off the job.
"The measures included in the new memorandum and which the three political leaders agreed with the government and the troika are the 'tombstone' of the Greek society," civil service union ADEDY said. "It's time for the people to speak up."
ADEDY and its private sector sister GSEE represent about two million workers, or roughly half the country's workforce.
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