ATHENS  Greece took a big step toward overhauling its debt-plagued economy on Thursday by forcing through a pension bill that would sharply pare down the country’s welfare state by increasing the retirement age and reducing benefits.

For Prime Minister George Papandreou, who commands a seven-member majority in Parliament, the bill represents the beginning of the end of the cradle-to-grave state compact that his father put in place as prime minister in the early 1980s.

The plan was approved in principle late Wednesday. Individual provisions were approved on Thursday as workers protested outside the Parliament building, and the whole package passed Thursday night by a vote of 157-134.

Three months after Europe provided Greece with a financial rescue program worth 110 billion euros  about $140 billion, and half of Greece’s gross domestic product  the government has exceeded the deficit-cutting benchmarks set by the International Monetary Fund. Officials see the bill’s passage as further evidence for skeptical investors that Greece is committed to pushing through painful overhaul measures that will restore fiscal stability.