News In Depth
Greece agrees cuts as riots go on
Greek MPs have imposed tax hikes and spending cuts to stave off bankruptcy amid a second day of rioting which left dozens injured.
After voting through a new austerity package, the Athens parliament will vote on Thursday on changing the law to implement the measures.
But a 48-hour strike and violent protests have raised fears of widespread defiance of more belt-tightening.
London's leading shares surged as the vote allayed City fears that Greece will default on its debts. The FTSE 100 was 89 points higher and stocks on Wall Street and in Europe were also higher on the news.
Agreement on the 28 billion euro (?25 billion) austerity package to try to lower the massive Greek deficit was a condition for receiving the next ?10.7 billion instalment of a ?96.5 billion Greek bail-out programme from the EU and the IMF.
Warnings that the alternative to more austerity was imminent national bankruptcy persuaded opposition MPs to back Prime Minister George Papandreou and impose deeply unpopular cuts.
The 155-138 vote for austerity was welcomed in Brussels as the only option for a Greek economy still on the slide.
Greece needs nearly ?4 billion of the latest bail-out instalment by July 15 to pay its most pressing debts.
If the necessary law changes to impose the austerity package goes through tomorrow, eurozone finance ministers are likely to nod the payment through at emergency talks in Brussels on Sunday.
That does not solve the long-term Greek crisis, and a second massive bail-out, worth more than ?100 billion, is expected to be signed off for Greece later this year.
Meanwhile, the Greek government must face the fall-out from its decisions, with millions of angry workers threatening to rebel against the imposition of more job cuts, tax rises and pay cuts.
Violent clashes outside the Greek parliament involved police using tear gas and stun grenades to quell the rioters.
The fear in Greek political circles is of a longer-term orchestrated campaign of public sector strikes which will worsen the crisis.
But the new austerity package 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."
But the statement made clear the danger is not over.
It said: "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."
But the EU and the IMF are determined not just to save Greece, but to restore the credibility of the single currency and prevent euro "contagion" spreading to other struggling member states, including Ireland and Portugal.
Analysts have warned this is just the start of a long process to restore Greece's economy.
David Buik, of BGC Partners, said: "Restoring Greece's economy will take at least a decade. The taxation system has to be changed. The pension benefits are ludicrous.
"The sale of state assets, particularly property, will take years - particularly as title deeds seem to be in limited supply and there is no land registry."