Sri Lanka closed Day Two of the first Test 209 runs ahead of England on 84-5 at Galle on a day that saw after 17 wickets fall.
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The hosts took their overnight 289-8 to 318, with Mahela Jayawardene scoring an impressive 180 and England pacer James Anderson claiming 5-72.
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England then struggled against left-arm spinner Rangana Herath, who took 6-74, and were all out for 193 with Ian Bell (52) being the only big scorer. Thereafter, Graeme Swann revived English fortunes with a fine 4-28.