| 18.6°C Dublin

Greek government defies protesters and approves austerity package

GREECE’S government voted by a razor thin margin on Thursday to approve an austerity package needed to unlock vital aid and avert bankruptcy, despite an internal rift and violent protests at the gates of parliament.

Lawmakers approved the spending cuts, tax hikes and measures making it easier to hire and fire workers after nearly 100,000 Greeks waving flags and chanting "Fight! They're drinking our blood!" descended on Syntagma Square in central Athens.

Despite the abstention of their junior ruling partner the Democratic Left, Prime Minister Antonis Samaras's New Democracy Party and its Socialist PASOK allies passed the 500-odd page bill shortly after midnight.

They mustered 153 of parliament's 300 seats, with New Democracy and PASOK expelling seven deputies from their ranks for not backing the measures.

Earlier in the evening, clashes erupted when a handful of protesters tried to break through a barricade to enter the assembly. Riot police responded with teargas, stun grenades and, for the first time in an anti-austerity protest here, water cannon.

There was also chaos inside the assembly, where parliamentary workers briefly stopped the session by walking out when they discovered their salaries would be cut.

The bill covering the bulk of €13.5bn worth of belt-tightening measures is a precursor to the 2013 budget law, which the government is expected to push through on Sunday.

If it does, it is expected to unlock a 31.5 billion euro aid tranche from the International Monetary Fund and European Union that Greece needs to shore up its banks and pay off loans.

"We must now pass the budget and right after that work for the recovery of the economy," Samaras told Reuters after the vote.

The euro rose briefly to around $1.2780 from $1.2765 before the vote.

"We're seeing little bit of a bounce in the euro because the threat of a Greek exit from the euro zone is dissipating now that the Greeks have made the difficult decision to move forward with painful austerity measures," said Kathy Lien, managing director of BK Asset Management in New York.


The vote came on the second day of a two-day national strike called by the country's two biggest unions, which halted public transport and shut schools, banks and government offices. Garbage piled up on the streets.

Backed by the leftist opposition, unions said the measures would hit the poor and spare the wealthy, while deepening a five-year recession that has wiped out a fifth of the country's output and driven unemployment to a record 25 percent.