Greek parliament passes first austerity bill

ATHENS (Reuters) - Greek lawmakers on Wednesday passed the first of two austerity bills demanded by international lenders while on the streets police fired tear gas to drive back protesters who attacked the finance ministry.

The bill on tax hikes, spending targets and privatisations was passed by 155 votes for to 138 against, clearing the way for a second vote on Thursday on a separate bill enabling individual budget measures and the privatisation of specific state assets. Five MPs abstained and two were absent.

Both bills must be passed for the European Union and International Monetary Fund to release a vital 12-billion-euro (10.77-billion-pound) loan tranche that the government of Prime Minister George Papandreou needs to remain in funds.

"Now is the time to rise to the historical challenge, look to the future and secure it for the next generations," he told parliament ahead of the vote.

Swallowing her doubts, opposition deputy Elsa Papadimitriou defied her New Democracy party, which opposed the plan, and voted for the package, making up for Panagiotis Kouroublis, a rebel from the ruling PASOK party who voted against and was immediately expelled from the party.

"It is the most important decision and challenge of my political life," Papadimitriou said ahead of the vote. "(I will vote) yes, and I hope the government does not disappoint me."

As deputies debated the measures, police battled thousands of demonstrators in the street just yards away after protesters massed in front of parliament pushed over the metal barriers set up in front of the collonaded building.

"Cops, pigs, murderers," chanted the crowd at a line of helmeted riot police as tear gas projectiles filled the square outside parliament with stinging white smoke.

Protesters waved Greek flags and dozens joined hands in a traditional Greek dance in front of police lines as a tense standoff continued for much of the afternoon.

As violence flared, a group of protesters attacked the nearby finance ministry before being driven back by police.

Doctors working with the demonstrators said they had treated at least 25 people for minor injuries and 192 people with respiratory problems at the adjacent Syntagma metro station.

The measures demanded by international lenders as the price for continuing to support Athens have caused bitter resentment among Greeks coping with the deepest recession since the 1970s and now facing years of grim austerity.

SECOND VOTE RISK

Even with approval on Wednesday, there remains a risk that lawmakers may reject detailed austerity bills in votes on Thursday on the implementation of different elements of the plan, such as tax rises and the sale of state assets.

Mihalis Tzelepis, a deputy in Papandreou's PASOK party, said that although he would back the basic austerity package, he still had serious reservations and was not sure of how he would vote on the second bill.

"Will there be a way to compensate households for the heating fuel increase? Will there be exemptions for agriculture to help it be competitive? I am waiting for answers to see what I will do in the implementation law," he told parliament.

In a heated debate in parliament, opponents of the package said it merely delayed the inevitable and would do nothing to solve Greece's underlying problems.

"In three months, when we will see more of the same taking place, what will be your arguments then?" asked Alexis Tsipras, leader of the leftist SRIZA coalition. "Greeks are saying no to these catastrophic measures ... you cannot go far with all the people against you."

The prospect of a messy second vote could complicate any decision on releasing the 12-billion-euro tranche, part of a 110-billion-euro bailout package agreed by the EU and IMF last year.

Greece's euro zone partners have insisted that both bills must be passed for the loan to be released but the prospect of the global financial crisis that would probably follow a Greek default may prompt some flexibility.

If the second vote does pass, euro zone finance ministers are expected to approve the tranche at a meeting in Brussels on Sunday, with the IMF following on July 5.

Attention will then switch to a second bailout package, expected to be around the same size as the first, which would include some 30 billion euros in private sector participation through a voluntary rollover of existing debt.

(Additional reporting by George Georgiopoulos, Ingrid Melander, Daniel Flynn and Dina Kyriakidou; writing by James Mackenzie, Editing by Sonya Hepinstall)

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