Greece buys time as government survives confidence vote

The Greek government survived a critical confidence vote last night winning a temporary reprieve for the heavily indebted country which is fighting to avoid a default and chaotic exit from the eurozone.

A dramatic night at parliament in Athens saw a brief walkout by opposition MPs while tens of thousands of protesters in central Athens rehear-sed for a much tougher showdown next week when lawmakers will vote on an unprecedented package of new austerity measures.

The ruling socialists needed a simple majority to pass which they eventually got after midnight. Earlier, the Finance Minister, Evangelos Venizelos, had warned fellow MPs that turmoil in Greece had cause "distrust" in the rest of Europe: "This is an atmosphere that we have to change." he said.

Large sections of the city were closed off to protect Greece's unpopular politicians from angry crowds and managed to emblazon the word "thieves" on to the parliament building using lasers. Some protesters clashed with police in the early hours.

Last night's narrow victory for the ruling socialists must now be matched next week if Greece is to meet the terms demanded by the EU in return for the loans it requires to avoid a historic default.

As they awaited the vote, the crowd in Athens' Syntagma Square vented its anger against the MPs and the "troika" – the European Central Bank, EU and IMF – whom they accuse of punishing ordinary Greeks to save their own over-exposed banks.

EU leaders France and Germany have been criticised by economists for leaving the eurozone one Greek parliamentary vote away from a possible disaster.

There is little confidence, in Greece itself, that a second bailout will rescue the country from its mountainous debt and the MPs in parliament were being compared on the streets with "confirmed atheists" who cross themselves and "pray to God for a miracle".

The President of the European Commission, Jose Manuel Barroso, said it was Greece's "European responsibility" to back more painful measures: "These choices are not easy, but nor are the problems that need to be addressed."

After last night's drama, the battle lines will be drawn afresh for next week's attempt to get Greece's parliament to back the unpopular package of €28bn in spending cuts and tax increases as well as an ambitious €50bn privatisation programme.

Some areas of Greece were unable to watch last night's confidence vote as rolling blackouts continued due to a strike by workers at the state power company – one of the utilities to be put on sale. A huge turnout is expected along with a general strike to coincide with next week's vote, prompting fears of more violent riots that have been a feature of recent demonstrations.

The popular resistance to austerity measures has spread beyond Greece and has spurred demonstrations in Spain and Portugal. The increasing public awareness of the exposure of some of Europe's big banks to bad debts in Greece and elsewhere has led some people to question whether the bailouts are for overspending southerners or unpopular northern European bankers.

Opinion polls in Greece have shown a collapse in support for the deal which underpinned the country's initial bailout – known as the "memo" – as, one year on, there are no clear signs that it's working. The country's national debt is projected to swell to 200 per cent of national income over the four-year period of new austerity measures, with unemployment expected to rise to 15 per cent.

A deep recession has seen a rise in violent crime and up to half the shops on some of Athens' main boulevards have closed their doors as consumer spending has collapsed. Greece's position at the periphery of the EU has also seen it absorb waves of economic migrants accompanied by a rise in support for extreme right-wing groups such as Golden Dawn.

The newly-appointed finance minister Evangelos Venizelos – who was given the post during a reshuffle last week designed to quell dissent over austerity in the ruling party – attended the vote after returning from a meeting with his eurozone counterparts.

Before the vote took place, reluctant ruling party MPs said they would back the government despite the mounting fury of their constituents.

"I will back the confidence vote - but I won't give a blank check," insisted the socialist deputy Panagiotis Kouroumplis. In private, many of his colleagues said they have been reassured by ministers that the austerity measures would be watered down to avoid an outright revolt among party supporters.

Efforts to agree a grand political coalition collapsed last week over disagreements on who should lead it.