The Greek parliament approved a controversial property tax Tuesday that aims to plug a budget hole and help unlock bailout funds needed to prevent the country from defaulting.
The tax, which has sparked outrage as 70 per cent of Greeks own their homes, was approved by a party line vote as more than a thousand people protested outside on the streets.
Greece, under pressure from its international creditors to plug a budget gap of more than 2.0 billion euros ($A2.77 billion), earlier this month announced the tax of up to 16 euros ($A22.12) per square metre.
To help ensure collection, the tax is to be collected by power companies on their bills to clients, with electricity to be shut off for those who refuse to pay.
The finance ministry said this week that Greeks have 400 billion euros ($A553.06 billion) invested in property, roughly the size of the nation's sovereign debt which is more than 350 billion euros.
It has estimated the tax is only 0.2 per cent of the real value of property and was "a completely tolerable burden".
"The important thing is to meet the 2011 and 2012 budgetary targets," Finance Minister Evangelos Venizelos told the parliament ahead of the vote.
More than a thousand members of the protest group calling themselves the 'indignants' protested outside parliament and tried to breach a police cordon in front of the entrance.
Police used tear gas to disperse the demonstrators, arresting one, a source said.
The long-term unemployed will be exempt from the tax, so long as their family income is less than 12,000 euros a year and the value of their property does not exceed 150,000 euros.
The finance ministry has also said the tax would not apply to state offices, embassies, religious buildings, monasteries, non-profit organisations, charities and amateur sports clubs.
WORLD STOCKS SOAR ON EUROZONE DEBT HOPES
US and European stock markets rallied for a second day running Tuesday on hopes, but not much evidence, that leaders are preparing a major response to the eurozone debt crisis.
The euro also rose against the dollar as Greek Prime Minister George Papandreou insisted Greeks were making a "superhuman" effort to keep on top of the crisis and German Chancellor Angela Merkel said cutting debt was the only way forward.
Only France let slip signs of a new plan to end the crisis with Prime Minister Francois Fillon saying any announcement would be made after Germany's parliament approves boosting the eurozone rescue fund in a vote on Thursday.
Meanwhile the Greek parliament took a crucial step to approve a controversial property tax that aims to plug a budget hole and help unlock bailout funds needed to prevent the country from defaulting.
European shares rallied, with Paris CAC-40 index soaring 5.7 percent. Frankfurt's DAX jumped 5.3 percent and London's FTSE-100 index climbed 4.2 percent.
In the United States, after adding nearly three percent during the session, profit-taking set in and the Dow Jones Industrial Average closed up 1.3 percent. The broader S&P 500 rose 1.1 percent and the Nasdaq Composite added 1.2 percent.
Earlier Asian equities rebounded on bargain-buying after recent heavy selling. Tokyo gained 2.8 percent, Hong Kong rocketed 4.2 percent and Sydney advanced 3.6 percent.
In the United States, all eyes were on dinner talks in Berlin between Merkel and Papandreou.
"A sizable rally lost ground in the final hour as the stock market remained vulnerable to headlines out of Europe," Sameer Samana of Wells Fargo Advisors said of the US markets.
In Europe, banking shares led the charge higher, with BNP Paribas and Societe Generale soaring more than 14.0 percent in Paris on anticipation of a recapitalization plan for French lenders and reports of upcoming expanded financing from the European Central Bank.
"European leaders continue to differ about final resolutions," said CMC Markets analyst Michael Hewson said.
"But with the (EU/IMF auditors) set to return to Athens and the Greek parliament set to pass the new austerity measures, it seems likely that Greece will receive its next eight billion euro aid tranche, which could well defer the next stages of the crisis for another few weeks."
"Obstacles still remain, especially constitutional ones," Hewson added, citing the Bundestag vote Thursday.
The euro pushed higher, trading at 2100 GMT at $1.3590, compared to $1.3523 late Monday.
US Treasury bonds fell, with the yield on the 10-year bond rising to 2.02 percent from 1.90 percent Monday, while the 30-year yield increased to 3.12 percent from 3.00 percent.
In its first bond auction since its credit rating was downgraded by Standard & Poor's last week, the Italian Treasury was forced to offer sharply higher rates to attract investors to buy up 14.5 billion euros in debt.
The rate on six-month bonds jumped to 3.071 percent compared to 2.14 percent for a similar operation last month.
"There has been no concrete alteration in the structure of the eurozone since the end of last week but the market has been willing to clutch at the idea that politicians at least recognize there is an urgent requirement for action," said Rabobank analyst Jane Foley.
"Further delays in a solution to the crisis are almost inevitable suggesting that the euro is far from out of the woods," she added.
