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Greece Bailout Funds Clear Final Hurdle As Second Bill Passed

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GREECE AUSTERITY BILL
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ATHENS, Greece — Greece has faced down street violence and strikes for the sake of financial aid it was promised and needs to avoid bankruptcy. Now its fellow European countries will be expected to come up with a second rescue package to convince investors that the 17-nation euro will survive the debt crisis.

A new austerity package that lawmakers cleared in Athens is required to get more rescue loans but will force deep changes on all parts of society. Minimum wages will be taxed more and key assets like water, gas and oil companies will be sold, possibly to foreigners.

Having done what it was asked, Greece will now look to its bailout creditors to hold up their side of the bargain.

Finance ministers from the eurozone meet in Brussels on Sunday to rubber-stamp the release of a euro12 billion ($17 billion) installment of rescue loans from the existing euro110 billion ($159 billion) bailout.

They will also discuss the terms of a second rescue plan meant to reassure markets over Greece's longer-term prospects, although many experts say the debt pile is so big that some form of default will eventually be required.

"Greece has bought more time," said economist Vagelis Agapitos. "This time, however, will start running out rather quickly unless Greece starts to deliver on its promises."

The EU and International Monetary Fund had said they would refuse to pay out the next installment unless Greek lawmakers approved a new five-year package of euro28 billion ($40 billion) worth of spending cuts and tax hikes, and a euro50 billion ($72 billion) privatization plan, before the end of June.

The lawmakers delivered what was asked of them, in votes Wednesday and Thursday. Global markets cheered, but anger in the streets of Athens grew – and quickly turned violent.

More than 300 people, nearly half of them police, were injured in two days of mayhem.

As lawmakers debated the bills in parliament, rioters on the square outside pelted police with chunks of marble and firebombs. Police responded with a barrage of stun grenades and tear gas. Windows at cafes and shops were smashed, and a post office housed on the ground floor of the finance ministry building was torched. Burning barricades set up across central streets smoldered into the early hours of Thursday.

Finance Minister Evangelos Venizelos, who has been in the job less than two weeks after being appointed in a cabinet reshuffle, has openly admitted some of the measures are unfair. But he has insisted the country has no choice – Greece would have run out of money to pay salaries and pensions in mid-June had it not passed the two austerity bills.

Caroline Atkinson, chief spokeswoman at the IMF, welcomed the vote in Athens. "This will pave the way for the completion of the fourth review by the IMF's Executive Board and the release of the next tranche," she said.

But Greece has only won a reprieve of a few months. The next batch of rescue loans will see it through September, after which it will once again have to prove it has implemented all it has promised before it can receive any further funds.

The details of a second rescue plan from Greece's international creditors will be crucial. Prime Minister George Papandreou has indicated it will be roughly the same size as the last one – but it is unclear how much money will come from a voluntary debt rollover by private investors and how much of Greece's sell-off of state assets will be used to plug the funding gaps.

The involvement of the private sector is likely to feature heavily at the Brussels talks after German banks agreed to roll over some of the debts Greece owes them. The news follows a similar announcement earlier this week from French banks, although details of the initiatives remain sketchy.

Greece needs the second rescue plan to clear up market worries about a default.

Fears of a debt default have weighed heavily on global markets in recent weeks. Investors worry that it could trigger a major banking crisis and turmoil in global markets, similar to what happened when the Lehman Brothers investment house collapsed in 2008 in the United States.

Many economists say there is no way that the country will not eventually restructure its debts – negotiating longer repayment times or giving creditors less than the full amount owed. They say Greece's debts of euro340 billion ($491 billion) are just too big for a country of only 11 million people to handle, no matter how much austerity is imposed.

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Derek Gatopoulos in Athens contributed.

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