By Renee Maltezou and Harry Papachristou
ATHENS (Reuters) - Greek police fired teargas and battled masked demonstrators who attacked the finance ministry on Wednesday after lawmakers passed the first of two austerity bills demanded by international lenders to stave off default.
As thousands of protesters rallied outside parliament, deputies voted by 155 to 138 to pass a framework bill on a bitterly contested package of tax hikes, spending targets and privatisations agreed as part of an EU/IMF bailout.
The result cleared the way for a second vote on Thursday to pass a separate bill enabling individual budget measures and the creation of a privatisation agency. Five MPs abstained and two were absent.
Both bills laying out a 28 billion euro ($39.7 billion) austerity plan must be passed for the European Union and International Monetary Fund to release a vital 12-billion-euro loan tranche which the government needs to be remain in funds.
"Today a significant step was taken, tomorrow the second one will take place and Sunday I will be able to go to the Eurogroup meeting with credible credentials for the country," Finance Minister Evangelos Venizelos told Reuters after the vote.
Speaking later in parliament, he denounced the clashes taking place in the streets outside.
"The police has the duty to protect law and order and face down all violent provocations," he said.
European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy said in a statement that if the second vote passes, release of the loan tranche could be approved by finance ministers on Sunday.
However the bitter opposition to the plan among broad sections of the Greek population was underlined by the violence which erupted on Syntagma Square just outside parliament as the votes were being counted.
With Greece stuck in its worst recession since the 1970s and a youth unemployment rate of more than 40 percent, ordinary people face years of grim austerity and many feel deeply resentful of Greek politicians, the EU and the banks.
"Cops, pigs, murderers," chanted the crowd at a line of helmeted riot police as flash bombs and teargas projectiles thrown by police to drive back the crowd filled the square outside parliament with stinging white smoke.
One group of protesters attacked the nearby finance ministry on Syntagma Square, setting fire to a post office on the ground floor of the building.
Another group tried to set fire to an office block housing a branch of one of Greece's biggest banks while across the square, the luxury King George Hotel was evacuated.
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. At least 40 police officers were hurt, the police union said.
SECOND BILL QUESTION
Even with the first bill's approval, 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.
That could complicate not just a decision on the 12 billion euro tranche of last year's 110-billion-euro bailout but also discussions on a planned second bailout of about the same size that will include some 30 billion euros in private sector participation.
Mihalis Tzelepis, a deputy from the ruling PASOK party, said that although he backed the basic austerity package, he still had serious reservations and was not sure 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.
Financial markets reacted positively to Wednesday's vote but there was no confidence that it solved Greece's longer-term problems, with EU officials and lenders deep in negotiations over the second rescue package.
"It is obviously an encouraging development in the sense that it reduces the chance of an imminent disaster for Greece," Ben May, an economist with Capital Economics in London, said.
"The bigger issue is there is a lot of uncertainty about the second bailout package and, even when in place, if Greece will be able to implement the privatisations and all the austerity measures," he said.
The vote, which was opposed by the center-right opposition, passed after conservative deputy Elsa Papadimitriou defied her New Democracy party and voted for the package.
That made up for 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."
A splinter group of five conservative deputies, led by former foreign minister Dora Bakoyanis abstained from the vote.
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 SYRIZA coalition. "Greeks are saying 'no' to these catastrophic measures ... you cannot go far with all the people against you."
($1 = 0.705 Euros)
(Additional reporting by George Georgiopoulos, Ingrid Melander, Daniel Flynn and Dina Kyriakidou; writing by James Mackenzie, Editing by Michael Roddy)