Narrow vote grants government authority to make cuts and tax rises approved in principle on Wednesday
Greece's chances of avoiding a catastrophic disorderly default appeared to improve on Thursday as the Greek parliament approved the second stage of its ?28bn (�25bn) austerity plan, and Germany announced that its banks will support a new bailout package.
After heated debate, MPs narrowly voted in favour of an enabling bill that gives Greece's government the authority to implement the package of deep spending cuts and hefty tax rises that was approved in principle on Wednesday. The legislation was carried by 155 votes to 136.
Greece is now expected to receive ?12bn in immediate aid from the International Monetary Fund, the European Union and the European Central Bank.
Herman van Rompuy, president of the European Council, swiftly welcomed the result, which also eases the way towards a second bailout package, likely to be worth around ?110bn. "This was the second, 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," he said in a joint statement with European Commission president Jos� Manuel Barroso.
The measures contained within the ?28bn package include a new solidarity tax on income, cuts to public sector wages, reduced benefit payments and cuts to government spending on health and defence.
In a further development, Germany's finance minister, Wolfgang Sch�uble, said that German banks will roll over ?3.2bn of Greek debt due to mature in the next three years. This would spare Greece from the burden of repaying the debt, although the precise details of the plan were not available. Sch�uble said it built on the plan recently proposed by France, under which banks would roll over 50% of their maturing debt into new long-term bonds.
France and Germany together hold a large proportion of total Greek debt.
Shares rallied again in London and New York, adding to Wednesday's gains. The FTSE 100 was up 64 points in afternoon trading, at 5920, and the Dow Jones gained 104 points to 12365.
A growing number of economists believe that Greece will have to restructure its debts. The fear is that the process cannot be managed in a way that would avoid a new financial crisis.
Ratings agency Fitch has predicted widespread panic if Greece were to lurch into default. "A disorderly Greek default would likely result in severe market volatility, pressures on sovereign and bank funding and a broader re-pricing of eurozone sovereign credit," Fitch said.
"The risk of contagion to other distressed and vulnerable eurozone sovereigns and their banking systems is material. Resolution of the current Greek crisis is therefore essential ? though not sufficient ? to prevent a systemic threat to the eurozone."
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