* Merkel to host G7 colleagues starting on Sunday
* Police outnumber protesters in Bavarian resort town
* Ukraine and Greece crises could overshadow meeting (Updates protest numbers, adds detail on demonstration)
By Paul Carrel and Michelle Martin
GARMISCH-PARTENKIRCHEN, Germany, June 6 (Reuters) - P rotesters clashed with police in the German resort town of Garmisch-Partenkirchen on Saturday as thousands demonstrated against a meeting of Group of Seven (G7) leaders that starts on Sunday at a nearby luxury hotel.
Police responded with pepper spray when a group of marchers tried to break through their cordon. Scuffles first broke out as the demonstrators, some throwing bottles, faced off with riot police in a narrow lane of quaint Alpine houses on the edge of the town.
Occasional clashes followed as the demonstrators snaked their way back through the town. One paramedic said several protesters were taken to hospital and he was aware of around 30 people with minor injuries.
A police spokeswoman could not give any official figures on casualties, nor say whether there had been any arrests.
The crowd was estimated by police at 3,500-4,000 while organisers put it at 7,500. Police vastly outnumbered the marchers in the picturesque former winter Olympic games venue at the foot of Germany's highest mountain, the Zugspitze.
Playing drums, tambourines and shaking rattles, protesters shouted "Brick by brick, wall by wall stop G7 and make the system fall!". They carried banners reading "Fight G7 for Revolution" and "G7 go to hell! I like Putin".
"I'm protesting because the big financial corporations have too much influence over politics," said Thomas Schmidbauer, 50, from Sindlsdorf in Bavaria, who was dressed in traditional Bavarian lederhosen shorts.
"Poverty isn't being tackled. It is unfair. We could organise our economies much better for the people," he added.
The protest began in scorching heat but as it drew to a close a thunderstorm drenched the demonstrators and threatened to wash out their camp.
Some 17,000 German police have been deployed around the summit site in the Bavarian Alps and another 2,000 Austrian police were on standby across the nearby border.
German Chancellor Angela Merkel will welcome the leaders of Britain, Canada, France, Italy, Japan, the United States and the European Union on Sunday at a meeting expected to focus on issues like climate change, the fight against pandemics, Middle East turmoil and an upsurge of violence in Ukraine.
They are also due to discuss the world economic recovery and officials said Greece's unresolved debt standoff with its IMF and euro zone creditors would figure on the sidelines.
This will be the second summit of industrial nations to exclude Russia, frozen out of the G8 following its annexation of Ukraine's Crimea region last year.
Rainer Lipfert, 71, wearing a red t-shirt saying "Putin sympathiser", said excluding Russian President Vladimir Putin would only escalate the conflict.
"We're seeing the beginning of a Cold War now with both sides rattling their sabres," he said.
Merkel spoke to Ukrainian President Petro Poroshenko before the G7 summit and they called for all sides to respect a ceasefire in eastern Ukraine after the latest flare-up, a German government spokeswoman said. (Additional reporting by Michelle Martin, Sabine Siebold and Andreas Rinke; Writing by Noah Barkin; Editing by Paul Taylor)