Greece faces further hurdles and delays before it can receive a second, euro130 billion ($171 billion) bailout despite its lawmakers voting through more austerity measures in the face of violent protests.
The European Union's Economic Affairs Commissioner Olli Rehn on Monday called the Greek Parliament's approval of a further round of budget cuts a "crucial step forward," but Germany insisted it would still take some time before the second bailout is delivered.
Germany, which as Europe's biggest economy pays the largest part in bailout deals, said it wouldn't give its final approval for the new aid payments until early March _ after it becomes clear how many banks and investment funds are willing to take losses on their Greek bonds and the parliament in Berlin votes on the new measures.
Pushing the new bailout back for several weeks underlines the amount of distrust that has built up against Greece over the past two years, when many promised cuts and reforms were passed in its Parliament but never actually implemented.
But it also means that Greece, its citizens, and the rest of the world economy won't know for several weeks whether the country can avoid a potentially disastrous default. A bankruptcy could force Greece out of Europe's euro currency union, drag down other troubled eurozone countries and further roil global markets.
The uncertainty over European Union financial reforms and the region's weak economic outlook led the rating agency Moody's Investor Service to downgrade its credit ratings on Italy, Portugal and Spain, while lowering the outlook for its ratings on France, Britain and Austria to "negative" from "stable." Moody's also cut its ratings on the smaller nations of Slovakia, Slovenia and Malta.
"Germany is trying to get the best deal it can by putting pressure on Greece now," said Ben May, European economist at Capital Economics in London. The idea is to "give Greece a bit more of an incentive over the next few weeks to speed things up and get things moving."
But delaying the final approval of the bailout is not without risk. Uncertainty over the new rescue money could dissuade some of Greece's private investors from participating in a separate bond swap deal, May warned. A hitch in getting the bailout package through national parliaments in the eurozone could also push Greece perilously close to missing a euro14.5 billion bond redemption on March 20, he added.
German Finance Minister Wolfgang Schaeuble stressed that Europe was doing everything to help Greece avoid bankruptcy, "but Greece itself of course must want that." He told German public broadcaster ZDF that if Greece were to default on its debt, Europe "is better prepared now than two years ago."
Greece's political leaders scrambled over the weekend to get new far-reaching austerity measures through Parliament ahead of a meeting of the finance ministers from the 17 euro countries on Wednesday. The drastic cuts debated on Sunday included axing one in five civil service jobs over the next three years and slashing the minimum wage by more than a fifth.
As Greek lawmakers voted on the new cuts, the streets of Athens and other cities were rocked by violent protests. In Athens, at least 50 buildings were burned while dozens of stores and cafes were smashed and looted. Police arrested at least 79 pople and detained a further 92, while in several cases they had to escort fire crews to burning buildings after protesters prevented access.
However, the Greek Parliament's vote hasn't brought an end to the uncertainty. Apart from some technical decisions, several key issues remain:
_It is unclear whether the new spending cuts, the debt relief deal and the new bailout will be enough to bring Greece's debt load down to 120 percent of economic output by 2020 _ the maximum its international creditors perceive as sustainable.
Several weeks ago, the EU estimated that there was still a financing gap of around euro15 billion ($20 billion) and an EU official on Monday could not say whether the gap has since decreased. There is hope that the European Central Bank, which also holds a significant amount of Greek debt can help close that gap by forgoing profits on those bonds.
_Greece's debt sustainability depends on whether enough private investors participate in a bond swap designed to slice some euro100 billion ($132 billion) off Greece's euro350 billion ($464 billion) debt pile. Athens wants banks and other investment funds to exchange their old Greek bonds for new ones with half the face value, lower interest rates and longer repayment deadlines. But the deal will only work if almost all private bond holders take part. If not enough of them sign up, Greece could still pass new legislation that could force holdouts to participate.
_Athens still needs to spell out how exactly it plans to cut an extra euro325 million in spending this year. The sum was included in the austerity package that passed through parliament, but Greece hasn't said where the money will come from. An EU official said Monday that much of the euro325 million could come from further cuts to Greece's defense budget.
_The other 16 countries that use the euro are still waiting for the leaders of Greece's two main political parties to commit in writing to implementing the new austerity measures even after elections expected for April. Both the Socialists and the center-right New Democracy party backed the package in the parliamentary vote, but New Democracy leader Antonis Samaras has said that he disagrees with some of the measures.
_National parliaments in Germany, Finland and the Netherlands will have to vote on the second bailout package. Since those countries are traditionally most critical of bailouts, the votes are unlikely to happen before there is clarity on whether the bailout deal will actually make Greece's debt sustainable again. Germany said its parliament will vote on Feb. 27.
Germany's insistence on taking more time to decide whether it is willing to send more bailout money to Greece means the final decision on the rescue loans will have to be split from the bond swap deal.
The swap offer for private investors has to be launched this week so that it can be completed ahead of March 20, when Greece has to redeem some euro14.5 billion in bonds.
The finance ministers from the other 16 countries that use the euro as their currency could give Greece the green light to make the swap offer to investors at their meeting Wednesday, which would give investors several weeks to decide whether to participate.
However, the finance ministers "will have to provide the private sector with some assurances on the second bailout in order for them (the private bondholders) to look at the deal and make a real judgment," said Capital Economics' May.
"Everything takes place or nothing takes place and that by definition makes it a more complicated and time consuming process," May warned. "Assuming a deal is put in place, it's likely to come right down to the wire."
Juergen Baetz in Berlin and Elena Becatoros in Athens contributed to this story.