JOIN USThe measure slashes 6 billion euros ($7.9 billion) from the budget in an effort to bring Greece's deficit down to 7.4 percent of gross domestic product (GDP), from 15.4 percent in 2009.
The cuts were required as part of a bailout agreement reached with the European Union and International Monetary Fund (IMF), after the previous Greek government had doctored figured to hide Greece's spiralling deficit, which flouted requirements that eurozone governments not run deficits of more than 3 percent of GDP.
Prime Minister George Papandreou's ruling Socialist government forced the legislation through, with all 156 of the party's members in Parliament's 300-seat lower chamber voting in favour, to 142 votes against by conservative and communist opposition parties.
Papandreou called it a "deep crisis" for Greece, and called for the opposition to stand by the government in the "race" to save the nation for future generations.
"I and more determined than ever to change Greece," he said. "We will not go bankrupt."
Conservative opposition leader Antonis Samaras said that the government's policies of austerity and higher taxes were strangling the Greek economy: "The way of this crisis lies in growth."
During the parliamentary debate Wednesday, even some of Papandreou's own Socialist deputies criticised the belt-tightening as hurting the economy.
Some Socialist deputies even accused Papandreou of marginalising them in favour of a close circle of advisors, along with IMF and EU economists, in forging economic policy. But in the end, the ruling party held together to pass the austerity budget.
The rating agency Fitch had threatened Tuesday night to downgrade Greece's credit rating to junk status. Its current BBB- rating is reportedly undergoing a review that is to be completed in January.
BBB- is the lowest investment grade that Fitch awards.The Greek retailer's association said that sales had slumped by 40 percent this year.
Labour stoppages to protest the cuts have laid large parts of the Greek economy lame in recent weeks.
Wednesday was no exception, as bus and train drivers in Athens staged a 24-hour strike over the government's plans. Greek commuters clogged streets in an effort to get to work without public transportation operational.
Several hundred people - predominantly civil servants from state organisations - rallied Wednesday in front of Parliament against the looming cuts, chanting "thieves, thieves" and accusing politicians of having led Greece into bankruptcy. But the turnout was far smaller than what organisers had hoped for, Greek media reported.