Greece agrees more austerity measures to tackle soaring debt

Greece's governing Socialists won a key budget vote calling for deeper austerity measures in the crisis-hit country and promising to avoid default despite a soaring national debt. MPs voted 156-142 on Wednesday night in favour of the 2011 budget, braving a third year of recession to trim 5bn euro off the deficit through higher consumer taxes and cuts in health and defence spending.

The latest cuts are needed for the country to continue receiving loans from the 93.5bn bailout fund created for Greece by European countries and the International Monetary Fund.

But the government is facing growing hostility from Socialist-dominated unions and even its own party.

Prime minister George Papandreou insisted the austerity measures – including pay cuts for state workers, sale tax increases, and axeing employment rights – were working.

"We will not go bankrupt. In 2012 we will return to a path of growth... we will not give speculators or ratings agencies the pleasure," he told parliament shortly before the vote.