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Greek pensioners have been some of the hardest hit by bank closures lasting nearly three weeks
Eurozone ministers have agreed to give Greece a €7bn (£5bn) bridging loan from an EU-wide fund to keep its finances afloat until a bailout is approved.
The loan is expected to be confirmed on Friday by all EU member states.
In another development, the European Central Bank agreed to increase emergency funding to Greece for the first time since it was frozen in June.
The decisions were made after Greek MPs passed tough reforms as part of a eurozone bailout deal.
Greek banks have been closed for almost three weeks.
Eurozone leaders agreed on the bailout in principle in Brussels on Monday, on the condition that the Greek parliament passed reforms on taxation increases and pension curbs by Wednesday.
The €7bn bridge loan was agreed in a conference call on Thursday to tap the EU’s EFSM emergency fund.
At a news conference on Thursday, ECB President Mario Draghi said emergency funding – ELA – to Greek banks was being raised by €900m over one week.
“Things have changed now,” he said. “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.”
Analysis by Chris Morris, BBC Europe correspondent
The European institutions are now picking up the pace to make sure this rather chaotic show stays on the road.
There’s more emergency funding for Greek banks from the ECB. And there’s progress towards agreement on a €7bn bridging loan to get the Greek state through the next few days.
Greece needs to repay €4.2bn to the ECB on Monday, as well as making up all its missed payments to the IMF. In other words it needs to spend the €7bn almost as soon as it gets it.
There are still one or two flies in the ointment.
Officials have been working on ways to ensure that non-eurozone countries are protected from any “negative financial consequences” of the bridging loan, because the EFSM fund which is being tapped to help Greece involves all EU member states.
Britain and others aren’t happy – especially because David Cameron thought he’d received a cast iron promise (he mentioned it in his election manifesto) that the EFSM would never again be used for eurozone rescues.
But some creative financial engineering should ensure that the EFSM deal gets done. And then attention will turn to negotiations on the three-year bailout programme that Greece has applied for.
Plenty of things can still go wrong.
Greek Prime Minister Alexis Tsipras won the parliamentary vote in the early hours of Thursday by 229 votes to 64, but needed the support of opposition MPs to do so.
His left-wing Syriza-led government is expected to survive, despite losing its majority after 38 Syriza MPs rejected the reforms.
It paves the way for eurozone finance ministers to open detailed talks on the bailout, worth up to €86bn.
Finland’s parliament on Thursday approved the bailout talks – one of a number of eurozone states which require a mandate from their own parliament for Greece to secure new funds.
Germany’s parliament is due to vote on the deal on Friday.
Passionate opposition came from within Mr Tsipras’s own Syriza party, with parliamentary speaker Zoe Constantopoulou calling the measures “social genocide”.
Speaker Zoe Constantopoulou was among the Syriza MPs who rebelled
Former Finance Minister Yanis Varoufakis was another vocal opponent.
In his address to parliament Mr Tsipras said: “I acknowledge the fiscal measures are harsh, that they won’t benefit the Greek economy, but I’m forced to accept them.”
Since capital controls were imposed and the banks shut on 29 June, Greeks have been limited to withdrawing €60 a day.
German Finance Minister Wolfgang Schaeuble, known for his hardline approach, told national radio he would submit a request for parliament to reopen negotiations on the third bailout with “full conviction”.
What happens next?
- EU member states to back eurozone decision on €7bn bridge loan to clear Greece’s immediate debts (expected Friday)
- German parliament to back negotiations on €86bn eurozone bailout deal (Friday)
- Greek parliament to pass further reforms (22 July)
- Lengthy eurozone talks to start on bailout through European Stability Mechanism
But he also said he believed a temporary “Grexit” – Greece leaving the eurozone – would perhaps be a better option.
By 22 July, Greece must also commit to a major overhaul of the civil justice system. It has to agree to more privatisation, to review collective bargaining and industrial action, and make market reforms, including Sunday trading.
The vote in the early hours of Thursday approved:
- VAT changes including a top rate of 23% to take in processed food and restaurants; a 13% rate to cover fresh food, energy bills, water and hotel stays; and a 6% rate for medicines and books
- An increase in corporation tax from 26% to 29% for small companies
- An increase in luxury taxes on big cars, boats and swimming pools
- An end to early retirement by 2022, increasing the retirement age to 67
Opponents of the bailout measures took to the streets of Athens in mainly peaceful protests ahead of the vote on Wednesday. However, one group threw petrol bombs at police officers who responded with tear gas.
Unions and trade associations representing civil servants, municipal workers and pharmacy owners also went on strike on Wednesday.
Riot police were deployed to disperse the protesters in Athens on Wednesday evening
BBC