Greece’s parliament approved deeply unpopular austerity measures despite worsening violence Wednesday, in a vote vital toward securing international funds and preventing the euro zone’s first sovereign default.

Greece's parliament approved deeply unpopular austerity measures despite worsening violence Wednesday, in a vote vital toward securing international funds and preventing the euro zone's first sovereign default.

Lawmakers approved a five-year package of spending cuts, tax rises and state asset sales by a comfortable margin of 155 votes to 138 in a roll-call vote, handing a significant victory to embattled Prime Minister George Papandreou.

"We must avoid the country's collapse at all costs. Now is not the time to step back," the Socialist premier told lawmakers in a final appeal just before the crucial vote.

The bigger than expected margin suggested the government should be able to push through laws implementing detailed budget measures and privatizations Thursday.

Outside parliament, fierce clashes raged between stone-throwing masked youths and riot police, who fired clouds of teargas from behind steel crash barriers to keep the rioters at bay. Syntagma Square resembled a battle zone at times.

One group of anarchists armed with sticks and iron bars attacked finance ministry offices just off the square, smashing windows at the entrance and on higher floors. They were driven off by police in more than two hours of cat-and-mouse clashes.

With the country on the brink of bankruptcy and social unrest mounting, it remains unclear whether the government can stick to a tight EU/IMF-imposed schedule to implement the harsh measures, even if it wins all this week's parliamentary votes.

The full pain of pay and benefit cuts and swinging tax increases has yet to be felt, and public anger is boiling.

PASOK official logo

Many economists and investors still expect Greece to default in the medium-term. A senior German ruling coalition politician, Free Democratic floor leader Rainer Bruederle, said Wednesday a debt restructuring was inevitable.

Only one PASOK party deputy voted against the plan, and he was immediately expelled from the party by Papandreou.

At least one opposition deputy broke ranks with the main conservative New Democracy party to vote "yes" on the austerity package and one of three PASOK rebels changed heart.

Chancellor Angela Merkel of Germany, Europe's reluctant paymaster and the main contributor to the Greek bailout, was first to praise the "brave" Greek vote on the fiscal package.

The decision was "brave as well as necessary," Merkel told a meeting on financial regulation in Berlin, adding: "I find it especially regrettable that the Greek opposition is

FRENCH PLAN ADVANCES

If the implementation legislation passes, euro zone finance ministers meeting in Brussels Sunday are likely to agree to release the next aid tranche, with the IMF following on July 5.

Attention will then switch to putting together a second and longer-term rescue package for Greece of about the same magnitude as the initial €110 billion bailout.

European Central Bank policymaker Juergen Stark rejected any idea of EU guarantees as part of a Greek debt solution.

France had the largest foreign private-sector exposure to Greece at more than $56 billion, followed by Germany, at end 2010, data from the Bank for International Settlements shows.