By Michael Winfrey and Harry Papachristou
ATHENS (Reuters) - The Greek parliament approved an austerity budget for next year on Sunday, allowing it to extend its international financial bailout and avoid bankruptcy.
With backing from all three parties in conservative Prime Minister Antonis Samaras's coalition, the bill passed by a more comfortable margin than a separate package of deficit-cutting measures on which some of his allies had abstained on Wednesday.
Passing both bills had been necessary to unblock a new tranche of credit from the European Union and International Monetary Fund before the government ran out of cash.
Samaras said he now expected the funds to be forthcoming, although a meeting on Monday in Brussels of euro zone finance ministers is not expected to take a final decision on that.
Referring to the 2013 budget and to last Wednesday's other measures, Samaras told parliament before Sunday's late-night vote that Greece was turning a corner: "The sacrifices included in that law and in the budget we are voting today are the last.
"We will start rectifying the injustices included in them once we get out of the deficits ... But the reforms we passed will be permanent and will boost the economy."
His critics are sceptical, though after years of mounting public anger there are signs of fatigue. A demonstration called by trade unions and communists mustered thousands of protesters outside parliament, but the numbers were a small fraction of the almost 100,000 who gathered outside the legislature last week.
Many of the country's 10 million people, driven to despair by five years of economic contraction, fear attempts to cut the deficit will only deepen the crisis; unemployment is running at 25 percent and many find living standards have fallen sharply.
"All those measures throw us back 50 years," said Thymios Marvitsas, 75, during the protest on Sunday. "Our pensions and wages are cut. My life is getting harder and harder."
Police estimated the crowd outside parliament at 13,000.
Arguments about the wisdom of cutting spending have also divided the political establishment.
On Wednesday, the smallest coalition party, the Democratic Left, abstained from the vote, cutting Samaras's majority. But most of the rebels backed the budget bill and it passed comfortably, with 167 votes in the 300-seat parliament.
Securing both pieces of budget-cutting legislation has been a condition of renewing bailout funding and unlocking more than 30 billion euros in funds from the IMF and EU later this month.
The government, formed after a tumultuous election in June, has ignored sliding poll numbers and occasionally violent street protests in pursuit of favour with its creditors, a move the opposition says is a mistake.
"Greece's debt is not sustainable," said the leader of the leftist SYRIZA party Alexis Tsipras, as he attacked German Chancellor Angela Merkel. "Everybody knows that apart from Merkel, who has her own plan for a German Europe and wants to turn Greece into a debt colony and the European South into a low-labour cost special economic zone."
According to the budget draft, the Mediterranean state's economy will shrink for its sixth year running, by 4.5 percent.
The budget deficit will be 5.2 percent of gross domestic product (GDP), down from 6.6 percent expected this year. But once the cost of paying interest on its huge debt is removed, Greece will show a tiny surplus for the first time in decades.
These deficit figures assume Athens's lenders will extend a deadline for it to narrow its fiscal shortfall by two years in exchange for the new belt-tightening package.
The biggest cost-reductions next year are pension cuts of up to 15 percent for almost half the total 9.4 billion euros in budget savings and public wages cuts of 1.2 billion.
Greece's fiscal adjustment has hit workers more than the wealthy elite. This has become a sore point in a nation where media have published lists of bankers, lawyers and shipping magnates who they say have moved cash to Switzerland.
"It's always the same. The poor pay and no one touches the rich and the tax evaders. Winter is coming and I can't afford heat," said 41-year-old housewife Angeliki Petropoulou.
The budget foresees debt rising to 346 billion euros, or almost 190 percent of GDP, from 175 percent this year.
EU and ECB officials say that means that Athens will not be able to reduce its debt to 120 percent of GDP by 2020, the level the IMF has said is the ceiling for debts to be sustainable in the long term.
That has triggered a debate on how to reduce the debt, which include discussions on cutting interest rates on Greece's official loans, letting the ECB give profits from Greek bonds it holds back to Athens, helping bail out Greek banks with the EU's EFSF rescue fund, and other measures.
(Additional reporting by Phoebe Fronista; Editing by Anna Willard and Alastair Macdonald)