Support came pouring in on Wednesday (29 June) as Greece put increasing doubts over the country's stability and economic viability to bed.
José Manuel Barroso, the European Commission president, and Herman Van Rompuy, president of the European Council, both greeted the 'yes' vote as a show of national accountability.
"The country has taken an important step forward along the necessary path of fiscal consolidation and growth-enhancing structural reform. But it has also taken a vital step back – from the very grave scenario of default. This was a vote of national responsibility," the two leaders said in a joint statement.
Greek Prime Minister George Papandreou won a parliamentary majority in favour of a five-year austerity plan yesterday at midday, clearing a major hurdle in Greece's bid to win access to international funding and avoid default.
In a signal that the package had begun to win over even opposition politicians, Greek conservative lawmaker Elsa Papadimitriou said she would vote in favour of the austerity plan despite her party's rejection of the measures.
"It is the most important decision and challenge of my political life. Well, [I will vote] yes, and I hope the government does not disappoint me," Papadimitriou said ahead of the vote, adding that she was leaving her New Democracy group to become an independent.
Today the Greek parliament will be asked to take a second vote on the implementation of the programme.
Clearing the way for a second bailout package
Barroso and Van Rompuy urged the Greek parliamentarians to approve the technical implementation of the programme as soon as possible to secure the delivery of the next tranche of joint EU/IMF aid and to rally support for a second bailout package totalling €120 billion.
Nevertheless, many investors are taking yesterday's initial vote as a positive sign that should buoy markets.
"In general we would view it as a positive event. It takes one of the biggest policy issues off the table and turns the sovereign debt focus back to the US and away from Europe," John Augustine, a chief investment strategist from Ohio, told Reuters.
"I don't believe we'll see a massive risk rally given only one hurdle of many has been cleared. The risk of disorderly default has decreased in the near-term but overall sentiment remains very fragile," Peter Chatwell from Credit Agricole added.
To add to rising sentiment about Greece, banks have received positive signals from rating agencies that they will not call a French rollover plan for Greek debt a default, three people close to German lenders said yesterday.
"The whole charm of the French model is that it was worked out in a such way that it will be fine with the rating agencies," one of the people said.
Another source said the fact the French model was developed by banks implies the rollover will be fully voluntary – a precondition for rating agencies not to declare a default.
"It is not rocket science for a lawyer to figure out that a debt exchange won't trigger a credit event," a derivatives expert with knowledge of the talks said.
EurActiv with Reuters
