PANAMA CITY - Hundreds of students fought with police and hurled rocks at Panama's National Assembly Monday as protests against sweeping social security reform plans stepped up a gear.

Running battles between some 2,000 students and police broke out in rain-drenched streets in the center of the capital as youths smashed windows and closed roads.

Witnesses said at least one student was wounded by a shotgun blast, and several petrol bombs were also tossed at police lines.

The National Assembly is debating a proposed rescue package for Panama's ailing pension and health care system.

The reforms are seen as vital for Panama to reduce its fiscal deficit, improve its credit rating and allow President Martin Torrijos to push ahead with an ambitious plan to expand the interoceanic Panama Canal.

Torrijos' government last week proposed changes that include gradually raising the retirement age to 62 from 57 for women, and to 65 from 62 for men.

Workers will have to pay social security contributions for 25 years to qualify for the state pension, up from 15 years currently. Monthly contributions will also increase.

Further protests have been called for Wednesday but the reforms are likely to pass into law speedily as the ruling Democratic Revolutionary Party holds 46 of the 78 seats in the National Assembly.

Analysts say the social security system could go bankrupt within a few years if no action is taken, as its coffers have been drained by greater longevity, a decrease in the number of contributors and an increase in beneficiaries.

The system is running a $100 million annual deficit and the $1.68 billion reserve fund earmarked for retirees must cover pension commitments of $6 billion in the future.