Austerity vote clears hurdle

Greece approved more austerity measures needed to avert default next month, in a vote Wednesday that calmed markets but triggered a second day of riots that left dozens injured and the capital blanketed with tear gas.

The passage of the bill was a decisive step for the country to get the next batch of bailout loans from international creditors, and was met with a huge sigh of relief in markets and by Greece's partners in the eurozone. A Greek default could potentially trigger a banking crisis, particularly in Europe, and turmoil in global markets.

Another bill has to be passed today, Thursday, for the government to secure the money.

The bill to cut spending and raise taxes by €28 billion (US$40 billion) over five years, and raise €50 billion (US$71 billion) in privatisations over the same period of time, has provoked widespread outrage, coming after a year of deep cuts that have seen public-sector salaries and pensions cut and unemployment rise to above 16 per cent.

While deputies voted, stun grenades echoed across the square outside the Parliament building and acrid clouds of tear gas hung in the streets. The violence continued sporadically after the vote, and smoke was billowing from beneath the Finance Ministry.

Authorities and emergency services said 31 police and 15 protesters were injured and transferred to hospitals, while 30 people were detained, and 11 arrested.

The European Union and International Monetary Fund have demanded both bills passed before it releases a €12-billion instalment of the country's €110-billion (US$157-billion) bailout fund. Without it, Greece was facing defaulting on its debts by the middle of next month.

Even with the instalment, Greece is still in financial trouble and has been in talks with its international creditors for a second bailout, which Prime Minister George Papandreou has said will be roughly the same size as the first.

"We must avoid the country's collapse with every effort," Papandreou said before the vote. "Outside, many are protesting. Some are truly suffering, others are losing their privileges. It is their democratic right. But they and no one else must ever suffer the consequences ... of a collapse. We must do everything so that there is no freeze in payments."

The unpopular package of spending cuts and tax hikes passed by 155 votes to 138, with five opposition deputies voted 'present' - a ballot which backs neither side.

The Greek vote was greeted positively in Europe's capitals, which have been fretting about the impact of a potential Greek default both on their banking systems and on the future of the euro currency itself.

Germany is Greece's biggest creditor.

- AP