Greece's governing Socialists have won a key budget vote calling for deeper austerity measures in the crisis-hit country and promising to avoid default despite a soaring national debt.
MPs voted 156-142 in favour of the 2011 budget, braving a third year of recession to trim 5bn euro off the budget deficit through higher consumer taxes and cuts in health and defence spending. Two opposition parliament members were absent.
The latest cuts are needed for the country to continue receiving loans from the £93.5 billion bailout fund created for Greece by European countries and the International Monetary Fund. But the government is facing growing hostility from Socialist-dominated unions and even critics within its own party.
Prime minister George Papandreou insisted the austerity measures - including pay cuts for state workers, sale tax increases, and axing employment rights - were working.
"We will not go bankrupt. In 2012 we will return to a path of growth ... we will not give speculators or ratings agencies the pleasure," he told parliament shortly before the vote.
The budget calls for continued tightening in Greece's 228.4 billion euro economy in 2011, and is aimed at lowering the deficit to 17 billion euro or 7.4% of GDP.
But the country's debt-to-GDP ratio is set to exceed 150% next year, from 127% in 2009, leading to continuing fears of eventual default.
Mr Papandreou has promised to return to the bond market some time in 2011, but warnings this month from three ratings agencies that Greek bonds are likely to suffer fresh downgrades have checked those expectations.
Unions, meanwhile, are stepping up protests.
Outside parliament, about 1,000 people took part in a peaceful protest organised by Greece's two largest unions against the cuts. Protesters held banners reading "Ban layoffs, write off the debt" and "Open-ended strikes until our final victory".