Thousands of Greeks marched on parliament on Saturday in a show of unabated public anger after Prime Minister George Papandreou reshuffled his cabinet and vowed to push on with a belt-tightening campaign.

In a move meant to stifle dissent in his Socialist Party, Papandreou on Friday dismissed former Finance Minister George Papaconstantinou, author of a new five-year austerity program that has sparked weeks of protests.

The reshuffle coincided with a pledge by France and Germany to continue funding Athens, a move that may have bought Greece and its fellow euro zone members time to prevent a messy default, even if doubts over its longer-term solvency persist.

The European Union and International Monetary Fund have made the reforms a condition for a new bailout package worth an estimated 120 billion euros ($170 billion) that Greece, shut out of capital markets, will need to fund itself through 2014.

Around 5,000 protesters from the Communist group PAME marched into Athens' central Syntagma square -- where demonstrations turned violent earlier this week -- chanting the measures are killing us!

French activists also performed with a three-meter puppet depicting a bloodied figure of Lady Justice to rhythmic drumming in a gesture of solidarity with Greek protesters who have camped in the square for three weeks.

What has changed with the reshuffle? Nothing, said Costas, a 22-year-old student who has been camping on the square since the beginning of the month. We are not planning to leave unless they take back the measures.

RESHUFFLE MIGHT WEAKEN REFORMS

Papandreou appeared to curb a revolt in his party by including some of the austerity package's harshest critics in the new administration, but that might also weaken the reforms.

He named political heavyweight Evangelos Venizelos, his biggest party rival, as finance minister.

Shortly after his nomination, Venizelos said he would travel to Brussels on Sunday to ask lenders to allow some improvements ... for social justice in the reform package.

On the same day, euro zone finance ministers are expected to agree to release a 12 billion euro tranche of an existing, year-old bailout loan that Greece needs to pay back debt maturing in July and August and avoid default.

They've bought themselves time until September, said Howard Wheeldon, strategist at BCG Capital Partners in London.

Germany and France are the main countries involved here, and neither of them are going to let the euro fail, and they're not going to let Greece fail.

Luxembourg's Jean-Claude Juncker, the chairman of the euro zone finance ministers' Eurogroup, criticized German pressure to involve bondholders, telling a German newspaper this has pushed up the cost of the bailout.

Successful negotiations over a new aid package for Greece are vital to the economic health of the euro zone, Juncker said.

We are playing with fire, he said, adding that in the worst case, ratings agencies could declare a default leading to dire consequences for the currency union.

Papandreou's new cabinet is expected to survive a parliamentary confidence vote on Tuesday night, and then approve a package which envisages 28 billion euros in tax hikes and spending cuts by 2015.

But Greek media were less certain about implementation, an issue that dogged Venizelos's predecessor when he struggled to meet deficit targets agreed with Greece's bailout lenders.

Greece needs a strong government. But does it need a strong government to finally implement what has been agreed with the EU or to break these deals?, columnist Yiorgos Karipidis wrote in main Greek financial daily Imerisia.

FEARS OF DEFAULT

Greece's biggest union GSEE, representing around 2 million workers in the private sector, called for a 48 hour strike when parliament votes on what has been dubbed the mid-term plan. The government hopes that will happen by end-June.

German Finance Minister Wolfgang Schaeuble said on Saturday all parties negotiating a new bailout had agreed that private creditors should be involved on a voluntary basis but details on how to do this still needed to be worked out.

German Chancellor Angela Merkel on Friday backed away from a demand that private bond holders swap their holdings for new Greek debt with maturities of seven years.

She said she now believed an option based on investors voluntarily maintaining their exposure, which some banks have suggested they might explore, would be sufficient.

The Franco-German agreement on Friday boosted markets, reducing risk premiums on Greek and other peripheral euro zone bonds after a week-long financial retreat.

The European Union's internal markets commissioner said a restructuring of Greece's 340 billion euro debt is not on the agenda.

It would only postpone the problem and in the wake of a restructuring Greece would face exactly the same difficulties and would no longer have any credibility to borrow, Michel Barnier told Europe 1 radio, describing Greece as a country that had been badly run and had lived above its means.

Bond markets remain spooked by fears of Greek default and most economists are overwhelmingly skeptical that Greece can ever repay a debt pile that economists expect to rise to 170 percent of the country's annual economic output by 2013.

I think (the markets) will calm down in the next two to three weeks, but tensions may well start to step up again in four to five weeks, BCG Capital Partners' Wheeldon said.

(Additional reporting by Barry Moody, Hugh Lawson and Brian Rohan in Berlin; writing by Michael Winfrey; editing by Barry Moody/Ruth Pitchford)