Greek parliament passes cuts plans

(AP)

The Greek parliament has voted narrowly in favour of imposing more belt-tightening on its people in a bid to pay the nation's debts and stave off looming bankruptcy.

The Greek parliament has voted narrowly in favour of imposing more belt-tightening on its people in a bid to pay the nation's debts and stave off looming bankruptcy.

Opposition MPs heeded last-minute pleas from Prime Minister George Papandreou, that there was no alternative if the country was to continue receiving bail-out cash from the European Union and the International Monetary Fund.

A "No" vote would have been catastrophic for the Greek economy and for the crumbling credibility of the euro - but the relief in Brussels and in other eurozone capitals will be short-lived if mounting public anger prevents the new austerity package taking effect.

The vote went through in the Athens parliament against a backdrop of rioting in the streets outside as police clashed with protesters opposing more tax hikes, spending cuts and a privatisation sell-off demanded by the country's international creditors.

New IMF chief Christine Lagarde had called for national unity in Greece to get to grips with the continuing economic crisis.

This afternoon's decision was one of the toughest Greek MPs have had to take for years - but another crucial vote comes tomorrow when the Parliament must decide on how to implement the 28 billion euro (£25 billion) package.

And effective implementation will be difficult if an increasingly rebellious public defies the deal and refuses to hand over more taxes or absorb more cuts to pay the price for an economic crisis they say was not their fault.

Nevertheless the 155-138 vote this afternoon should be enough in itself to ensure the handover of the latest 12 billion euro (£10.7 billion) instalment of an EU-IMF bail-out fund agreed a year ago and worth a total of 110 billion euro (£96.5 billion).

Greece has been warned for weeks that the latest slice of the money would be withheld without today's "yes" vote, allowing Greece to default on its debts within weeks.

Continuing with the payment should now be a formality when EU finance ministers hold a special meeting in Brussels on Sunday to decide the next step.

Greece desperately needs the latest aid by July 15 to meet its immediate debts, but already Europe is considering a second massive bail-out - probably worth more than the first - because of the scale of the crisis and the risk of "contagion" to other struggling eurozone economies.

But the scale of rioting on the streets of the capital and across Greece hint at serious difficulties to come for the Greek government.

Police used stun grenades and tear gas to quell crowds who gathered in front of the parliament, and the angry mood persisted after news of the vote was relayed outside the building.

The fear in Greek political circles is of a longer-term orchestrated campaign of public sector strikes which will worsen the crisis.

People taking to the streets of Athens today insisted that not only were they not to blame for the nation's deep economic crisis, but the first round of austerity measures had clearly failed to work and should not be extended.

UK Independence Party leader Nigel Farage said: "This vote is a real life Greek tragedy, keeping the country imprisoned inside an unsuitable currency union and with unserviceable debts.

"Greek democracy is dead. Don't be surprised if increasing numbers of Greek people take matters into their own hands."

The result was hailed as a "vote of national responsibility" by European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy.

In a joint statement they said: "With today's approval by the Greek parliament of the revised economic programme, the country has taken an important step forward along the necessary path of fiscal consolidation and growth-enhancing structural reform. But it has also taken a vital step back - from the very grave scenario of default. This was a vote of national responsibility."

But the statement made clear the danger is not over.

"Tomorrow, the eyes of Europe will again be turned towards Athens as parliamentarians are called upon to approve the implementing measures for the programme.

"A second positive vote would pave the way for the disbursement of the next tranche of financial assistance. It would also allow for work to proceed rapidly on a second package of financial assistance, enabling the country to move forward and restoring hope to the Greek people."

European Parliament President Jerzy Buzek said: "In years to come, this vote may be seen as a turning point for Greece and the eurozone. This was not an easy choice to make and I salute those who voted in favour of this tough reform package. They have shown remarkable leadership when it was most needed.

"All of us in the EU are in the same boat, and in this rough sea of financial turbulence, going below the deck will not shelter us from the storm. We must act together in the fight against the debt crisis.

"I hope that the vote on the implementation package will receive the same support tomorrow."