ATHENS European creditors moved cautiously toward re-opening funding to Greece's stricken economy on Thursday, hours after a fractious Greek parliament approved a tough bailout program aimed at preventing a chaotic exit from the euro.
Prime Minister Alexis Tsipras won the backing of parliament in the early hours of Thursday for the stringent reform measures demanded by the 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 European Central Bank was set to delay an increase in vital emergency funds to the Greek banking system until a broader backstop was in place.
But euro zone finance ministers were expected to unlock 7 billion euros ($7.6 billion) in bridge loans later on Thursday, in a move which could persuade the ECB to open up the credit lines to Athens relatively soon.
Irish Prime Minister Enda Kenny expressed some optimism that the ECB, under its president Mario Draghi, would approve more funding for the banks, although he emphasized the ECB was independent from political influence.
"I would expect - and I can't comment on its independence - that Mario Draghi and the European Central Bank will consider turning on the tap to some extent, in terms of the emergency liquidity," Kenny told Irish radio.
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.
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.
After a warning from the International Monetary Fund this week that Greece's massive public debt could not be managed without a significant writedown, Schaeuble said that a debt "haircut" was incompatible with euro membership and would mean Greece would have to leave the euro, at least temporarily.
"But this would perhaps be the better way for Greece," he told Deutschlandfunk radio.
Greek banks remained closed for a third week, with capital restrictions in place and cash rationed from automatic teller machines, and they will not be able to re-open until the ECB moves to re-open emergency funding.
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.
All 28 EU countries are expected to contribute, despite the reluctance of non-euro members such as Britain and the Czech Republic, after a compromise was found to use euro zone funds to guarantee their ring-fenced contributions.
The Greek parliament comfortably approved the agreement that Tsipras struck on Monday with the euro zone that demands austerity measures and liberal economic reforms tougher than those rejected by voters in a July 5 referendum.
Some of the main measures, including an increase in value-added tax, take effect immediately, although it will be extended to hotels only in October, after the peak tourist season.
But 32 of the 149 lawmakers from Tsipras's radical left Syriza party voted against the plan while six effectively abstained and one was absent, meaning he had to rely on opposition votes.
"Tsipras continues wounded, until further notice," the front page of left-leaning Efimerida Ton Syntakton newspaper said. "Governments fall when they lose the support of the people, he says."
Among the dissenters were four members of the government, one of whom resigned. The dissidents also included the speaker of parliament and ex-finance minister Yanis Varoufakis, who compared the Brussels deal with the 1919 Versailles Treaty that imposed unpayable reparations on a defeated Germany after World War One.
"FORCED TO ACCEPT"
Tsipras told lawmakers he had accepted a package he did not believe in and which would harm Greece, but the alternative was a disorderly bankruptcy that would be more catastrophic.
"I acknowledge the fiscal measures are harsh, that they won't benefit the Greek economy, but I'm forced to accept them," he said before the vote in the early hours of Thursday.
However his position as head of government faces no serious internal challenge and he is expected to reshuffle his cabinet to remove dissident leftists.
He has ruled out early elections and said this week the captain does not leave the ship in a storm. There has been little pressure from any of the pro-European opposition parties which voted with his government to formalize the arrangement in the shape of a new national unity government.
However, the interior minister cast doubt on Tsipras's earlier comments. "It is very possible that elections take place in September or October, depending on developments," Voutsis said according to the text of an interview with Sto Kokkino radio released by his office.
"Even if we do go to elections, we will seek a mandate to adopt our program. Part of it are the commitments arising from the deal," he said.
Schaeuble, one of the toughest critics of Greece in the euro zone, said he would vote in favor of opening talks on a third bailout loan for Greece "with full conviction" when the Bundestag debates the plan on Friday.
"We are a step further," Schaeuble told Deutschlandfunk after the Greek parliamentary vote. "This is an important step."
He said it would be hard to make Greece's debts affordable without a "haircut" or writedown on the principal by European lenders, which Berlin says would be illegal under EU treaties.
The IMF highlighted the issue in a report released this week, saying the only alternatives to "deep upfront haircuts" would be for European creditors to grant Athens a 30-year debt service holiday on present and future loans or make large annual fiscal transfers to the Greek budget.
All those options are unpalatable to German and other euro zone creditor governments that do not want to tell their taxpayers that the money lent to Greece is not coming back.
Klaus Regling, head of the euro zone's bailout fund, said he expects it to contribute 50 billion euros to the third bailout of up to 86 billion euros.
"If everything should fail, then the Greek banking system will collapse," Regling told German broadcaster ARD.
The rest would come from 16 billion euros in remaining undisbursed IMF funds, once Athens has cleared arrears to the global lender, as well as privatization receipts and possible limited borrowing on the market near the end of the three-year program.
In Athens, cleaners removed overnight the debris of a pitched battle on Syntagma Square outside parliament between black-masked anti-bailout militants and riot police.
Protesters threw dozens of petrol bombs and hurled stones at the police, who responded with clouds of tear gas.
Tsipras won the vote thanks to the support of the center-right New Democracy, center-left Pasok and centrist To Potami opposition parties.
"The responsible opposition assumed the burden to rescue the country as did the prime minister, even though it was at the last minute," the conservative daily Kathimerini said in an editorial. "He deserves credit for this, but he lost the support of a large part of his party's lawmakers."
"He now has the big responsibility to ensure the country will have a government that keeps its pledges to creditors and implements them. Otherwise, his bold step will stall and with it the country’s European prospects," the paper said.
(Additional reporting by John O'Donnell in Frankfurt, Jan Strupczewski in Brussels, Padraic Halpin in Dublin, Caroline Copley in Berlin; Writing by Paul Taylor and James Mackenzie; editing by Anna Willard and David Stamp)