The Greek parliament passed a second austerity bill Thursday, opening the way for the EU and IMF to release a 12 billion euro ($17 billion) loan installment which Athens urgently needs to stave off bankruptcy.
The vote on detailed measures to implement 28 billion euros in spending cuts, tax increases and privatisations passed without any of the wild street battles which marred Wednesday's vote on an initial austerity bill.
The Eurogroup of euro zone finance ministers is now likely to approve payment of the latest loan installment this weekend.
I am very satisfied because now I can go to Eurogroup strengthened by a vote of confidence and two approved bills, Finance Minister Evangelos Venizelos told Reuters. We can now move to the next stage of finding a viable solution.
After a debate taken up partly by mutual accusations over the previous day's violence around Syntagma Square in central Athens, deputies voted 155 to 136 to pass the implementation law.
All individual articles went through with opposition support for privatisation and spending cuts, but one deputy from the ruling PASOK party voted against a part of the bill setting up a privatisation agency to handle the sell-off of state assets.
With Greece perilously close to a default that would cause chaos in financial markets, the European Union and International Monetary Fund had demanded that both bills be passed before it releases the next batch of a bailout package agreed last year.
Speaking before the vote, Belgian Prime Minister Didier Reynders said he expected that euro zone finance ministers would approve payment of the 12 billion euro installment at a meeting Sunday if the second bill passed.
The IMF, part of the so-called troika of international lenders along with the EU and European Central Bank, is expected to approve payment on July 5.
Release of the installment should avert immediate default but Greece is unable to borrow on financial markets and still needs a second bailout, roughly equivalent to the 110 billion euro package agreed in May 2010, to keep going until 2014.
The Socialist government of Prime Minister George Papandreou, whose PASOK party trails the conservative opposition in opinion polls, will also face major problems turning the deeply unpopular austerity measures into action.
The endemic problem of tax evasion and the need for swift action to begin a selloff of state assets will be among the top priorities, bringing the risk of more confrontation with powerful public sector unions which oppose privatisation.
The government, which halted privatisation when it came to power, must sell off 5 billion euros in assets this year or risk missing the targets under its EU/IMF program, which would cut off funding again.
Antonis Samaras, head of the opposition New Democracy party which opposed the austerity bills, said measures would only delay default and further harm Greece's stricken economy, straining under the weight of a public debt equivalent to 150 percent of gross domestic product.
This treatment will not cure the patient, he told parliament before the vote. I'm sorry because in a couple of months, you and the troika will realize the medicine has actually worsened the patient's health.
Even on the government side there was little confidence that the measures would help in the long term with one deputy saying they were just a stay of execution and it would be better to reach a deal with creditors to cut the overall debt burden.
After two days of clashes between police and stone-throwing youths, calm returned to central Athens, although a stinging tang of tear gas still hanging in the air and hastily boarded up shop windows testified to the violence of the previous 48 hours.
Recriminations began over accusations that the police had played a role in encouraging the violence but there was also alarm at the economic damage caused by the protests.
The Greek hotels association said the clashes had left a landscape of terror which it said risked causing lasting damage to the vital tourism sector, one of the main pillars of the fragile economy.
Stuck in the third year of Greece's worst recession since the 1970s, broad sections of the population are hostile to further austerity, with opposition extending from the union movement to the unemployed, pensioners and business groups.
The mid-term (austerity) plan is a futile road to nowhere, said Vassilis Korkidis, head of retail association ESEE.
It will bring over-taxation, shut down businesses, send workers away, reduce incomes, abolish social rights and health benefits and lower living standards.
Costas Panagopoulos, head of pollsters ALCO, said Papandreou faced a huge challenge pushing through the austerity measures in the face of general public resistance.
The problem for Papandreou is not in parliament, it is what is happening outside parliament, he said. Not in Syntagma Square which is just a few hundred protesters, but with the whole of Greece's 11 million people.
(Additional reporting by Harry Papachristou and George Georgiopoulos; writing by James Mackenzie; editing by David Stamp)