Greece crisis: Snap election may be called for September/October - interior minister

The vote 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 €7bn in bridge loans.

"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 €900m. 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.

Earlier today German Finance Minister Wolfgang Schaeuble questioned whether Greece will ever get a third bailout programme.

He said he would submit a request to Germany's parliament to vote on opening the talks and said passing the reforms was an "important step", but it would be hard to make Greece's debt sustainable without writing some of it off, an idea Berlin considers to be illegal.

Greece is seeking up to €86bn in a third rescue package in return for tougher austerity measures and structural reforms.

The International Monetary Fund is leading calls for a deep reduction in Greece's debt but Germany, the biggest contributor to the euro zone's bailout funds, has ruled one out.

Schaeuble, a member of the centre-right Christian Democrats, the party of Chancellor Angela Merkel where there is strong resistance to a new bailout for Greece, said such a step would not be compatible with membership of the currency union.

"But this would perhaps be the better way for Greece," he said.

Germany's tough line with Athens has made some of its European partners uncomfortable

In the strongest open criticism yet, Austrian Chancellor Werner Faymann, a centre-left social democrat, said the view of Schaueble that it might be better for Greece to leave the euro was "totally wrong".

"Finance Minister Schaeuble created the impression for some that it may be useful for us if Greece falls out of the currency union, that maybe we pay less that way," Faymann said in an interview with Austrian newspaper Der Standard published on Thursday.

"I think this is totally wrong. It's morally not right, that would be the beginning of a process of decay ... Germany has taken on a leading role here in Europe and in this case not a positive one."

Late last night Greek MPs voted overwhelmingly to approve a harsh austerity bill demanded by bailout creditors, despite significant dissent from members of prime minister Alexis Tsipras' left-wing party.

Outside parliament, anti-austerity protesters clashed with riot police.

Read more: More than 30 Syriza members vote against bailout deal

The bill has fuelled anger in the governing Syriza party and led to a revolt by its members against the prime minister, who has insisted the deal forged after a marathon weekend eurozone summit was the best he could do to prevent Greece from catastrophically crashing out of Europe's joint currency.

The bill, which imposes sweeping tax increases and spending cuts, was approved by 229 votes to 64 with six abstentions - and with the support of three pro-European opposition parties.

Read more: Greece crisis: Glossary of eurozone crisis jargon

Prominent Syriza party members were among the 38 dissenters during the bailout vote, including energy minister Panagiotis Lafazanis and former finance minister Yanis Varoufakis, who many blame for exacerbating tensions with Greece's creditors with his abrasive style during five months of tortured negotiations.

The vote came after an anti-austerity demonstration by about 12,000 protesters outside parliament degenerated into violence as the debate was getting under way last night. Riot police battled youths who hurled petrol bombs for about an hour before the clashes died down.

The bill was the first step Greece must take in order to begin negotiations with creditors on a new bailout - its third in five years - of about €85bn) in loans over three years.

Dissenters argued that Greeks could not face any further cuts after six years of recession that saw poverty and unemployment skyrocket and wiped out a quarter of the country's economy.

Mr Tsipras has been battling all week to persuade party hardliners to back the deal. He has acknowledged the agreement reached with creditors was far from what he wanted and trampled on his pre-election promises of repealing austerity, but insisted the alternative would have been far worse for the country.

"We had a very specific choice: A deal we largely disagreed with, or a chaotic default," he told parliament before the vote.

Mr Tsipras had urged Syriza members to back the bill despite having urged voters to reject earlier, milder creditor demands in a July 5 referendum. Greeks voted overwhelmingly to reject those proposals.

Finance minister Euclid Tsakalotos, who took over from Mr Varoufakis the day after the referendum, said the deal Greece reached with its creditors on Monday was the only possible choice.

"I must tell you, that Monday morning at 9.30, it was the most difficult day of my life. It was a decision that will weigh on me for the rest of my life," he said.

"I don't know if we did the right thing. But I know we did something with the sense that we had no choice. Nothing was certain and nothing is," he told parliament.

High-ranking dissenters included alternate finance minister Nadia Valavani, who resigned from her post yesterday, saying she could not vote in favour of the bill.

In a letter sent to Mr Tsipras she said she believed "dominant circles in Germany" were intent on "the full humiliation of the government and the country".

The economy ministry's secretary general Manos Manousakis also resigned over the measures.

Parliament speaker Zoe Konstantopoulou, a prominent Syriza member, slammed the deal as a product of blackmail, calling it a "crime against humanity" and "social genocide".

The vote came after more than two weeks of capital controls, with Greek banks and the stock exchange shut since June 29 and ATM cash withdrawals limited to €60 a day.

With its banks dangerously low on liquidity and the state practically out of cash, Greece desperately needs funds. It faces a Monday deadline to repay €4.2bn to the European Central Bank, and is also in arrears on €2bn to the International Monetary Fund.

Negotiations on the new bailout will take an estimated four weeks, leaving European finance ministers scrambling to find ways to get Athens some money sooner.

The European Commission has proposed giving Greece €7bn in loans from a special fund overseen by all 28 European Union nations so it can meet its upcoming debts. The loan would be made pending the start of a full bailout programme, but faces resistance from Britain, a non-eurozone member.

Germany argued that one way for Greece to meet its financing obligations was for it to issue IOUs for domestic needs.