The Greek parliament has approved a series of unpopular tax rises aimed at boosting revenue in line with Athens’ commitments to international creditors.
The measures, approved overnight, introduce a new top tax rate of 42% for Greeks earning more than 42,000 euros ($56,000) a year.
Corporate rates also go up and the tax base now includes low-earning farmers.
Greece has been kept solvent by huge rescue loans from its EU partners and the IMF since May 2010.
The Conservative-led government insists the new measures, designed to raise up to 2.3 billion euros this year, are fair.
“We are not in favor of taxes,” Deputy Finance Minister Giorgos Mavraganis said.
“But in the current situation we must lead the country out of its impasse.”
The Greek parliament has approved a series of unpopular tax rises aimed at boosting revenue in line with Athens’ commitments to international creditors
The changes are part of an overall package approved in November to allow Greece to qualify for further bailout funds.
But the opposition says the tax rises will increase hardship for ordinary Greeks. The main opposition Radical Left Coalition says austerity has “demolished the country’s middle classes”.
Deep spending cuts and job losses have triggered street unrest across Greece in recent years.
Greek parliament has narrowly backed a fresh round of austerity measures, despite violent protests across the country.
The austerity package aimed at securing the next round of bailout funds was passed with 153 MPs in favor – a majority of just three.
The 13.5 billion-euro ($17.3 billion) bill includes tax rises and pension cuts.
Earlier, riot police fired tear gas towards protesters when they were attacked with petrol bombs in Athens.
Prime Minister Antonis Samaras warned before the vote late on Wednesday that without the bailout Greece would run out of money this month and face “catastrophe”.
The austerity package – Greece’s fourth in three years – is meant to close the nation’s budget deficit, lower its huge debt burden and make its economy more competitive.
MPs must now pass a revised budget on Sunday before eurozone finance ministers meet next week to approve 31.5 billion euros in fresh loans from the European Union (EU) and the International Monetary Fund (IMF) that Greece needs to avoid imminent bankruptcy.
But the level of resistance on the streets is a reminder that implementing the latest tough measures will be extraordinarily difficult.
The crucial vote was held after a lengthy debate in the 300-strong parliament.
Greek parliament has narrowly backed a fresh round of austerity measures, despite violent protests across the country
Immediately after the bill was adopted, co-governing New Democracy and Pasok parties expelled seven lawmakers from their ranks for failing to back the package.
The adopted plan includes a two-year increase in the retirement age from the current average of 65, as well as salary cuts and labor market reforms, including cuts to holiday benefits, notice periods and severance pay.
Workers fear this will just make it easier and cheaper for them to be fired at a time when unemployment has already soared to 25% and a five-year recession means there are few job prospects.
“Many of these measures are fair and should have been taken years ago, without anyone asking us to,” Antonis Samaras said.
“Others are unfair – cutting wages and salaries – and there is no point in dressing this up as something else,” the prime minister said, adding that Greece was, nevertheless, obliged to take the measures.
Antonis Samaras has said that without this money, which will be used largely to recapitalize the country’s banks, the country will be bankrupt by 15 November.
Earlier on Wednesday, tens of thousands of protesters held a rally in Syntagma Square – outside the parliament building in the heart of the capital.
The protesters chanted: “People – don’t bow your heads!”
Some in the crowd held giant flags of Greece, Portugal, Italy and Spain – four of the eurozone’s most heavily-indebted states.
The riot police – who sealed off parliament – later fired tear gas after the demonstrators attacked them with petrol bombs and flares.
Protests also took place in other big cities across Greece.
The Greek unions were staging what they described as the “mother of all strikes” – a 48-hour walkout which culminated on Wednesday.
The third major strike in just two months brought public transport to a halt and shut schools, banks and government buildings.
Measures in austerity package
- Retirement age up from 65 to 67
- A further round of pension cuts, of 5-15%
- Salary cuts, notably for police officers, soldiers, firefighters, professors, judges, justice officials; minimum wage also reduced
- Holiday benefits cut
- 35% cut to severance pay
- Redundancy notice reduced from six to four months.