Greece agrees to austerity measure to prevent debt default

The Greek parliament has voted narrowly in favour of a package of austerity measures aimed at preventing the nation from defaulting on its debts.

The proposal includes tax hikes and spending cuts in order for the government to gain the latest tranche of a £98bn loan.

But these have become deeply unpopular with the Greek public, and violent clashes erupting in the streets of the Athens and a national 48-hour strike is under way.

MPs passed the measures by 155 votes to 138.

They will hold a second vote on Thursday aimed at changing a law allowing the package to be implemented.

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Prior to the ballot, PM George Papandreou tried to rally support from MPs to approve the package.

He has argued that the austerity plan is the only way to get Greece back on its feet.

“We must avoid the country’s collapse at all costs. Now is not the time to step back,” he told parliament.

Were his austerity package rejected, Greece feared running out of money within weeks, as the EU and the IMF want the measures implemented before they release more funds to help Greece pay off its debts.

Top EU officials welcomed the result as a “vote of national responsibility” that paved the way for a second aid package.

“The country has taken an important step forward along the necessary path of fiscal consolidation and growth-enhancing structural reform,” European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy said in a joint statement.

But Greek unions are angry that the government’s austerity programme will impose taxes on those earning the minimum wage.

Violence broke out after the announcement with dozens of rioters using ladders to storm an office building near parliament before being driven out by police.

Despite the problems, Greece is expecting a bumper year for tourism with visitors this summer due to cheap prices. Arrivals are expected to soar 10 percent, as tourists who might have headed to north Africa have instead opted for the Greek islands.

Officials are hoping the increase in the number of visitors will go some way to helping the country out of its financial hole.

Tourism accounts for one in five jobs and contributes almost 18 percent of GDP, and the government has given the sector special emphasis in the hope that it will help kickstart the economy.

Last month, the administration reduced the price of ferry tickets by abolishing levies. The move followed the waiving of landing and taking-off fees at airports outside Athens, which has resulted in a reduction in the cost of air travel. A similar decision to bring down VAT from 11% to 6.5 % on tourist accommodation has ensured the country has become more competitive.

Hotels beyond the capital have been deluged with bookings as tourists have scrambled to snap up double rooms going for as little as €13 on the island of Corfu and €36 on Mykonos.

The lifting of visa restrictions for non-EU citizens from Turkey, China and India has also added to the increase. Russian visitors are expected to exceed 500,000 this year, an increase of 50% over 2010.

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