EU moves to restore funding to Greece

Europe moved to re-open funding to Greece's stricken economy yesterday, hours after a fractious Greek parliament approved a tough bailout programme in a vote that left the government without a majority and looking to new elections within months.

Prime Minister Alexis Tsipras won the backing of parliament in the early hours of yesterday for the stringent reform measures demanded by Greece's creditors led by Germany, but was left weakened by a revolt in his left-wing Syriza party.

His Interior Minister, Nikos Voutsis, said that a snap election could be held in September or October, "depending on developments".

The move by the Greek parliament was enough to persuade the European Central Bank to re-open vital funds for the Greek banking system under its Emergency Liquidity Assistance (ELA) programme, after euro zone finance ministers signalled they would unlock 7 billion euros ($7.6 billion) in bridge loans.

Greek Prime Minister Alexis Tsipras (R) and Finance Minister Eyclid Tsakalotos react during a parliament session. Photo: AFP

"Things have changed now," ECB President Mario Draghi told a news conference in Frankfurt. "We had a series of news with the approval of the bridge financing package, with the votes, various votes in various parliaments, which have now restored the conditions for a raise in ELA."

Draghi said the ECB would increase ELA funding by 900 million euros. But he added that it was difficult to make decisions on Greece given the constraints of a programme which was never meant to provide unlimited and unconditional support.

Finnish and Lithuanian lawmakers gave their approval to begin negotiations, a day before the German parliament is due to vote on the issue, while the European Commission said it believed an agreement on providing short-term bridge financing to Greece could come shortly.

People march against the bailout deal in Athens. Photo: AFP

However, German Finance Minister Wolfgang Schaeuble underlined the risks still surrounding the negotiations that will need to be conducted over the next few weeks, saying a temporary Greek "timeout" from the euro may still be a better option.

European finance ministers held a conference call on Thursday morning to agree on a plan for the 7 billion euros in bridging funds to enable Greece to meet its immediate debt service needs and avoid defaulting on a repayment to the ECB next Monday.