Greek Prime Minister George Papandreou clinched enough votes topass the first part of an austerity plan aimed at meeting EuropeanUnion aid requirements and staving off default for his debt-ladennation.

Papandreou won by 155 votes to 138, a wider margin than lastweek's confidence ballot, as some opposition lawmakers abstainedrather than oppose a package that is the condition for furtherrescue funds. The vote was overshadowed by a 48-hour strike andscuffles outside Parliament that saw police fire tear gas atdemonstrators protesting budget cuts and asset sales.

Greek bonds rose as approval of the 78 billion-euro ($112billion) plan sparked optimism Papandreou can keep the country'scoffers intact for now. Attention now shifts to a second billtomorrow that authorizes implementation of the measures. Approvalwould allow Finance Minister Evangelos Venizelos to meet Europeancounterparts on July 3 for talks on releasing a fifth tranche ofaid from last year's 110 billion-euro bailout.

“Markets will calm down a little bit and the situation willimprove a little,” said Christoph Weil, an economist at CommerzbankAG in Frankfurt. “It's of course only a matter of time until thisstarts all over again. Greece needs to continue to implement itsreforms, and we can tell how difficult that is.”

Tear Gas
The yield on Greece's two-yeargovernment bond sank 77 basis points to 25.401 today. The eurotraded at $1.4395 at 6 p.m. in Athens, compared with $1.4421 whenthe vote started.

Clouds of tear gas engulfed the square outside Parliament aslawmakers voted on a package whose defeat could have led to theeuro area's first sovereign default. Greece needs to cover 6.6billion euros of maturing bonds in August and government officialshave said they may lack the money to pay wages and pensions bymid-July.

Smoke appeared to be billowing from the Hellenic Post Office,opposite Parliament and in the same building as Greece's financeministry, at 6:18 p.m. Riot officers and hooded youths with clubshave clashed over the past two days as crowds swelled to more than20,000 and some protesters fought police, broke windows at aMcDonald's Corp. restaurant and burned two vans.

Papandreou has fought his legislative battle in tandem with adrive by European officials to convince lenders to participate in aGreek rescue. German Finance Ministry officials met with banks andinsurers in Berlin today, using a French proposal as a blueprintfor discussion, two people with knowledge of the matter said.

Patriotic Duty
The vote followedPapandreou's plea to lawmakers to “do their patriotic duty” after astruggle to keep his party in line and recruit opposition allies.He appointed a new finance minister to stem defections, survived aconfidence vote and outlined 5.6 billion euros of additional budgetmeasures, including a 5 percent levy on lawmakers' wages.

“The overriding feeling across Europe will be relief,” TobiasBlattner, an economist at Daiwa Capital Markets Europe in Londonand a former European Central Bank official, said before the vote.“There will always be people who say it won't really changeanything and we'll still get a haircut, but at least it will buytime and calm the markets.”

Parliament has now begun to debate the next stage of theausterity plan to authorize implementation of the budget measures.Lawmakers will vote on the matter tomorrow. European UnionPresident Herman van Rompuy said in a statement that “the eyes ofEurope” will be on Athens again and that a second approval willhelp work on a second bailout package “proceed rapidly.”

Victory Margin
Lawmakers who backedPapandreou today “are likely to vote in favor also of theimplementation bill,” said Tullia Bucco, an economist at UnicreditGlobal Research in Milan. No time for the vote has yet beenannounced.

Papandreou's victory margin improved after five lawmakers inDora Bakoyannis' opposition Democratic Alliance party abstained.While socialist lawmaker Panagiotis Kouroublis was expelled fromthe party after he voted against the bill, the impact wasneutralized after New Democracy lawmaker Elsa Papadimitriou crossedthe floor to vote with the government.

EU officials had called on Papandreou to draw the widestpossible support for the austerity plan. EU Economic and MonetaryAffairs Commissioner Olli Rehn said yesterday that there is “noplan B” if the laws aren't passed, while Christine Lagarde, namedas the next head of the International Monetary Fund, called onGreece's opposition parties to offer support. The IMF providesabout 30 percent of Greece's bailout funds.

German Chancellor Angela Merkel said today the vote outcome is“good news.”

State Assets
Apart from sales of stateassets such as a stake in Public Power Corp. SA, the former powermonopoly, and levies ranging from 1 percent to 5 percent on wages,Papandreou's plan includes higher taxes on restaurants and bars,higher heating-oil taxes and lowering the tax-free threshold to8,000 euros from 12,000 euros presently. Greek newspaper To Vimacalculated the additional burden for an average Greek family offour at 2,795 euros a year, about the same as one month'sincome.

Implementing more austerity measures threatens to deepen athree-year recession and complicate efforts to boost governmentrevenue. Greek gross domestic product, which contracted 4.4 percentin 2010, will shrink a further 3.8 percent this year, according toa report from EU and IMF inspectors in June. The nation's debt loadwill peak at 166 percent of GDP next year, and is already thebiggest in the euro region's history.

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