Greek parliament approves implementation of austerity law

The Greek parliament approved detailed austerity and privatization bills today in a crucial vote to secure emergency funds and avert imminent bankruptcy, but longer-term dangers still lurk.

Prime Minister George Papandreou secured a majority for the legislation after lawmakers backed a 28 billion five-year euro austerity plan yesterday, clearing the last obstacle to the next slice of aid from the European Union and the International Monetary Fund.

The euro and global stocks rose to three-week highs in anticipation of the vote as investors expressed relief that the spectre of a sudden summer default had been avoided, despite fierce public opposition to more pay and spending cuts.

Belgian Finance Minister Didier Reynders said euro zone finance ministers were likely to agree as a result to release a next tranche of loans to Greece at a meeting on Sunday. The IMF is set to follow suit on July 5.

That 12 billion euro loan will prevent Greece defaulting in mid-July or at the latest on Aug. 20, when it must honor a big bond redemption, and shift the focus to a second assistance package likely to be about the same size as last year's 110 billion euro bailout.

In Berlin, Finance Minister Wolfgang Schaeuble said he had reached agreement with German banks and he expected a euro zone deal on Sunday on private sector participation in a new assistance programme, based on a French plan for a voluntary debt rollover.

German institutes were likely to contribute 3.2 billion euros. French banks and insurers have the biggest exposure among foreign holders of Greek debt. Greek banks have little choice but to roll over their holdings.

As Athens recovered from a night of violence, market concerns shifted from the danger of an immediate disorderly default for the first time in the euro zone to the medium-term prospect of a Greek debt restructuring.