Greek legislators have narrowly passed a crucial austerity bill, after thousands of people gathered outside parliament to protest against the cutbacks.
The bill, which will further slash pensions and salaries, passed 153-128 in the 300-member parliament early on Thursday.
It came hours after police used tear gas, stun grenades and water cannon to push back rioters during an 80,000-strong anti-austerity demonstration. Police said at least 20 people had been detained.
Approval of the cuts and tax rises worth 13.5bn euros ($17 billion) over two years was a big step for Greek efforts to secure the next instalment of its international rescue funds, and stave off imminent bankruptcy.
Prime Minister Antonis Samaras has said the country will run out of euros on November 16 without the funds.
"Today we took a big and decisive step towards growth," he said after the crucial vote.
The tough measures to be implemented by 2016, include raising the retirement age to 67, slashing benefits and cutting the minimum wage.
The close vote was a major political blow to the three-party coalition government, which holds a total of 176 seats in parliament. The result shows support for continued austerity three years into Greece's financial crisis is dwindling fast.
Immediately after the vote and before the tally had been officially announced, two of the three coalition parties expelled a total of seven dissenting deputies from their ranks.
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Deputies from the third, the small Democratic Left, mostly abstained, in accordance with their party's line. Leader Fotis Kouvelis had said in the days leading up to the vote that he could not back labour reforms included in the bill.
During hours of acrimonious debate in parliament, Samaras acknowledged that some of the measures in the bill were unfair, but insisted they were vital to avoid bankruptcy and Greece being forced out of the euro and back to its old currency, the drachma.
"This [bill] will finally rid the country of drachmophobia," Samaras said.
"Many of these measures are fair and should have been taken years ago, without anyone asking us to," Samaras said. "Others are unfair _ cutting wages and salaries - and there is no point in dressing this up as something else," he said, adding that the country was, however, obliged to take them.