Riot police used tear gas and baton charges to disperse rioters who chased the ceremonial guards in 19th-century kilts and tasseled garters away from the Tomb of the Unknown Soldier outside the Parliament, while a top trade union leader was roughed up by left-wing protesters.
It was the biggest outburst of violence since Greece's debt crisis escalated late last year. Police say they arrested 5 people, and seven officers were injured.
Greece's financial troubles have shaken the European Union and its shared euro currency, whose rules were supposed to prevent governments from running up too much debt.
Up to 7,000 demonstrators gathered outside as lawmakers debated the austerity package, which aims to save euro4.8 billion ($6.5 billion) with measures including higher consumer taxes and cuts to public sector workers' pay of up to 8 percent.
Papandreou met in Luxembourg with Prime Minister Jean-Claude Juncker, head of the group of eurozone finance ministers. Later Friday, he will hold talks in Berlin with German Chancellor Angela Merkel.
Demonstrators attacked the two military guards and their escorting officers, smashing windows and kicking the guard posts. Earlier, leftwing protesters attacked the head of Greece's largest trade union who was addressing the crowd.
GSEE head Yiannis Panagopoulos traded blows with his assailants before being whisked away bloodied and with torn clothes.
GSEE and the ADEDY umbrella civil servant union held work stoppages to protest the austerity measures, while hospitals, schools and public transport were closed down.
Further violence broke out later Friday in Athens, with masked youths attacking riot police inside the Council of State, Greece's highest administrative court, and trying to break into the Labor Ministry. Rioters also smashed the glass fronts of two banks, two hotels, a mobile phone shop and a fast food restaurant.
An earlier protest ended peacefully, while there were smaller clashes during two protests in Thessaloniki, Greece's second-largest city.
The center-left government says it is seeking a total euro16 billion ($21.87 billion) in savings this year, to reduce a bloated budget deficit of some euro30 billion that is over four times the EU limit as a percentage of annual output.
The cuts are key in convincing bond markets to loan the country money and to win support from the European Union.