Greece bought itself time to deal with its crippling debt crisis Thursday after lawmakers passed the second and final austerity bill essential for the release of crucial bailout funds that will prevent the country from defaulting next month.
The European Union and International Monetary Fund had demanded Parliament pass two bills — an austerity law and a second bill detailing how it will be implemented — before they approve a 12 billion euro ($17.3 billion) installment from the country's 110 billion euro ($159 billion) package of rescue loans.
Without the next installment of rescue loans, Greece was due to run out of money to pay salaries, pensions and other costs in mid-July.
Despite that overhanging threat, many Greeks were angry at yet more austerity. A 48-hour general strike and outbreaks of violence on the streets of Athens brought much of Greece to a standstill in the run up to Wednesday's vote on 28 billion euro ($40.5 billion) worth of spending cuts and tax hikes and a 50 billion euro ($72 billion) sell-off of state enterprises.
Fears of a Greek default have weighed heavy on global markets in recent weeks — investors have been fretting that a default could trigger a major banking crisis and potential turmoil in global markets, similar to what happened when the Lehman Brothers investment house collapsed in 2008 in the United States.
Michael Hewson, a market analyst at CMC Markets, told Reuters that the vote was not the end of the crisis, saying "all it is doing is delaying the inevitable."
"The Greek situation has been kicked down the road for a couple of weeks and the immediate prospect of a default (on the country's debts) is off the agenda for now," he said.
Questions remainThe vote for the austerity law had "bought more time to get the problem that is Greece solved," Hewson said, noting the bailout money was being used to pay off interest on the debts, not pay them off.
"Given what is going on the streets of Athens, you have to question whether Greece can implement these measures," he said.
Concerns of a near-term default have been eased as the money will see Greece through September when it will have to prove it has implemented all it has promised in order to receive any further funds from last year's euro110 billion bailout package.
Longer-term, there are still real worries that the country will end up having to restructure its debts — negotiating them down with creditors — in some shape or form.
Meanwhile, the Greek government has conceded that it's going to need more money from its creditors and is talks for a second bailout.
Last year's package was predicated on Greece being able to tap bond market investors for cash next year but with the country's interest rates at exorbitant levels, that looks highly unlikely.
As well as rubber-stamping the release of the next batch of bailout funds, finance ministers from the eurozone are expected to discuss the terms of a second bailout for Greece at their meeting Sunday in Brussels. The IMF is also expected to clear the immediate funds next week.
Parliament passed the second law by 155 votes to 136 Thursday, a day after voting through the main austerity bill in a vote held as rioters clashed with police outside parliament in a second day of violence.
More than 300 people were injured in two days of mayhem in central Athens, which saw rioters pelting police with anything they could find, and police responding with a barrage of stun grenades and tear gas that still lingered in the city's central square on Thursday morning.
Smaller protests expected
Unions have called for more protests Thursday night, although they are expected to be smaller in size.
The austerity measures, which slap taxes even on the lowest paid, have sparked repeated strikes and demonstrations.
The riots on Tuesday and Wednesday came during a 48-hour general strike that disrupted services across the country, forcing airlines to cancel or reschedule flights, halting nearly all public transport and leaving ferries tied up in port.
The EU welcomed Thursday's vote, with the heads of the EU commission and council, Jose Manuel Barroso and Herman Van Rompuy saying it was a "decisive step Greece needed to take in order to return to a sustainable path. In very difficult circumstances, it was another act of national responsibility."
German Finance Minister Wolfgang Schaeuble said Thursday that his country's banks had told him they were prepared to contribute to the Greek bailout.
The comments came after Schaeuble held closed-door talks with representatives of Germany's banks.
Details are yet to be finalized, but Deutsche Bank CEO Josef Ackermann said a French plan would serve as a "basis."
French President Nicolas Sarkozy said Monday that French banks were ready to help Greece by accepting a significant debt rollover. He said the plan would see banks reinvest their Greek debt holdings over 30 years.
French and German banks are among the biggest holders of Greek sovereign debt, according to the Bank of International Settlements.
