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Greece Takes Step Back From Brink, Approves Austerity Plan

WATCH: Protesters clashed with police in the Greek capital as lawmakers passed a new austerity package of spending cuts and increased taxes. (Video by Reuters)

Greek lawmakers have passed a tough new austerity package aimed at avoiding a national default, amid angry protests outside the parliament.

Today's vote is a victory for Prime Minister George Papandreou's Socialists, who hold a narrow majority with 155 seats in the 300-member legislature.

Lawmakers approved the five-year package by a margin of 17 votes.

The plan involves 28 billion euros of spending cuts and increased taxes, along with sell-offs of state property.

An additional bill, which details how the austerity measures will be implemented, must also be passed in a vote on June 30. The International Monetary Fund and European Union say the bills must be passed for Greece to get the latest installment of its 110-billion-euro bailout.

Without those funds, Greece within weeks will run out of money to pay its international debts.

But the measures are deeply unpopular.

A 48-hour general strike is under way and clashes continued today in the capital, Athens, with police firing tear gas to drive back protesters who attacked the Finance Ministry.

At least 46 people were injured during protests in Athens on June 27.

Protesters say already struggling Greeks will be hit most by the austerity measures.

"There is a vast difference between the will of the Greek people and those in the government," demonstrator Thanasis Didagelos told Reuters. "The Greek people are demonstrating. I came from Thessaloniki. I am a pediatrician from Thessaloniki. I am one of the 'fortunate' ones, but I came here for my children and for the future of this country."

Some 80 percent of the Greek population is opposed to the austerity measures because they will bring down wages, raise taxes, and cut funding for services.

Speaking before the vote, Papandreou said he understood that some people would suffer. But he said inaction would bring consequences even more dire.

"They are protesting and that is their democratic right," he said. "But the crucial thing is that no one, not any family, not any of us will live through the consequences of an [economic] collapse."

A default in Greece could also have much wider ramifications -- threatening the stability of the wider eurozone of which Athens is a member. That could hit European banks and shake the European and world economy.

On June 28, newly appointed IMF chief Christine Lagarde called on Greek politicians to unite to save their country from a debt default. She called on the Greek opposition to "join in national unity with the party which is currently in power."

With today's vote, the relief was palpable in Brussels.

In a joint statement, European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy hailed the vote as one of "national responsibility."

They said Greece had "taken a vital step back from the very grave scenario of default."

compiled from agency reports