Greek police fired tear gas to repel stone-throwing protesters after lawmakers approved drastic austerity cuts Thursday needed to secure international rescue loans worth euro110 billion ($140 billion).
In New York, Dow Jones industrials plunged almost 1,000 points before recovering to a loss of 328 as investors succumbed to fears that Greece's debt problems would halt the global economic recovery.
Thursday's clashes followed violent street protests Wednesday that left three people dead after a bank was firebombed.
Greek lawmakers voted 172-121 to approve the austerity measures -- worth about euro30 billion ($38.18 billion) through 2012 -- that will slash pensions and civil servants' pay and further hike consumer taxes.
The rescue loans are aimed at containing the debt crisis and keeping Greece's troubles from spreading to other countries with vulnerable state finances such as Portugal and Spain. The money will come from the International Monetary Fund and the 15 other governments whose countries use the euro.
Clashes in Athens broke out at the end of a main protest that drew tens of thousands of people as police pushed back a few thousand demonstrators outside parliament.
The violence was quickly contained with riot police firing tear gas at the protesters, who had earlier pelted them with stone, oranges and bottles. Several small fires burned in surrounding streets. No injuries or arrests were reported.
Demonstrators banging drums and shouting anti-government slogans through bullhorns, unfurled a giant black banner outside parliament earlier Thursday. More than 30,000 demonstrators filled downtown streets, chanting "They declared war. Now fight back."
Prime Minister George Papandreou expelled three Socialist deputies who dissented in the vote, reducing the party's number of seats to 157 in the 300-member parliament.
"We have done what was necessary, not what was easy," Finance Minister George Papaconstantinou said after the vote. "Without these measures, we'd be thrown into the deepest recession this country has ever known."
The bulk of Thursday's protest -- organized by the Greek Communist Party -- quickly dispersed, leaving about 5,000 demonstrators outside parliament before police pushed them back.
Protester Thodoris Mougiakos said he was angry the IMF would control Greek finances.
"It's blackmail," the 32-year-old engineer said. "There is money, but they spend it on things like armaments and businesses. The church has money too. If we had been drawing money from all these sources, we wouldn't be in this situation now,"
But the protest remained peaceful, in contrast with Wednesday's rioting that left three people dead, 59 injured and 25 people arrested. Police said 50 stores, banks and offices were damaged and seven vehicles damaged or burned.
Papaconstantinou said Greece would default on debt payments this month unless it received the bailout loans from the International Monetary Fund and 15 euro-zone countries that had remained divided for months on how to aid Athens.
"Today things are simple. Either we vote and implement the deal, or we condemn Greece to bankruptcy," Papandreou told parliament before the vote.
"Some people want that, and are speculating (on it), and hope that it will happen," he said, referring to speculative attacks that have been blamed for raising Greece's borrowing costs to unsustainable levels. "We, I, will not allow that. We will not allow speculation against our country, and bankruptcy to happen."
European governments are now scrambling to get parliamentary approval for the Greek loans. European leaders will meet on the issue in Brussels on Friday.
Fears of Greek default have undermined the euro, and while the current package should keep Greece from immediate bankruptcy, its long-term prospects are unclear. The country's growth prospects are weak, and the population's willingness to accept cutbacks may wane, leading some economists to predict an eventual debt restructuring somewhere down the road.
Opposition parties lambasted the government for imposing measures that are too harsh for the population to bear.
"The dose of the medicine you are administering is in danger of killing the patient," conservative opposition leader Antonis Samaras said.
"You know that these measures have sparked a social explosion ... The citizens of this country have to believe there is a way out. Because whoever cuts pensions of euro700 cannot convince anyone."
Samaras also expelled a dissenting lawmaker, former Foreign Minister Dora Bakoyannis, reducing his share of parliamentary seats to 90.
Associated Press writers Nicholas Paphitis and Derek Gatopoulos in Athens contributed.