German lawmakers have approved terms to the recently agreed rescue package for Greece that should pave the way for the struggling nation to receive its long-delayed aid €44bn tranche within weeks.
Members of Germany's Lower House of the Bundestag voted overwhelmingly in favour of the revised deal despite officials admitting for the first time this week that it would result in a reduction of revenues for the German government. The vote - supported by 473 members of the House against 100 ballots against with 11 abstentions - also bolsters the case for German Chancellor Angela Merkel and her centre right coalition government's handling of the region's debt crisis as they prepare for Federal elections next autumn.
"If we say the debts will be written off (Greece's) willingness to make savings is correspondingly weakened," Finance Minister Wolfgang Schaeuble argued during the debate which preceded the vote. "Such false speculation does not solve the problems; a Greek bankruptcy could lead to the break-up of the Eurozone."
The vote, however, was short of a so-called "Chancellor's Majority" - one which includes all members of the Bundestag and not those who voted - of 311 votes for the third time this year. Merkel gained the support of 297 of her coalition partners and 276 members of the opposition Social Democratic Party and Green Party.
The new agreement, reached earlier this week, will reduce Greece's debt ratio, as a proportion of its economy, to around 124 percent by 2020 and to 120 percent by 2022 through range of measures that include lowering interest rates on bi-lateral loans, extending the term of loans already outstanding and delaying targets for Greece's public finances.
Member states also agreed, after many months of negotiations, to forego their share of profits on Greek government bonds that were purchased through the European Central Bank's Securities Markets Programme.
"It's a turning point for Greece," said France's Finance Minister, Pierre Moscovici, during a conference in Paris organized by the France's Economy Ministry. "It's also a turning point for the Eurozone because it helps recreate stability and confidence. Greece's fate will no longer be a daily issue."
A critical portion of the rescue still to be decided, however, are the terms and conditions linked to a planned buyback of Greek government bonds. The IMF has insisted the Greece's debts are reduced to a sustainable level of 120 percent of GDP by 2020 and have refused to release their portion of the aid - around 1/3rd of the total - as a result.
"We will be looking for implementation of the buyback operation," said IMF spokesman Gerry Rice told the BBC. "Contingent on that implementation and the success of the buyback programme, we'll be in a position to put forward the recommendation to our board."
A buyback, analysts say, could persuade them to agree to release the cash as it could shave 10 percentage points from Greece's debt to GDP ratio over the next seven years.
Greece's Finance Minister, Yannis Stournaras has indicated the buyback may target as much as €62bn in outstanding government debt. Athens has been attempting all week to drum up support for the voluntary buyback from private investors, but has yet to decide on which securities it will target and what price it will offer to the bondholders.
Further complicating the process is that fact that Greek banks, which hold around €15bn of the debt, may have to accept below-market prices for their bonds, which have surged in value since speculation of the government buyback plan first surfaced several weeks ago. The would mean the banks would need to both realise losses on the principal amount and forgo many millions more in future interest payments.