Greek MPs are debating tough economic measures they must approve by the end of the day in order for an €86bn eurozone bailout deal to go ahead.
The new legislation includes tax rises and an increase in the retirement age.
As debate continued, protesters threw petrol bombs at police during an anti-austerity protest close to parliament, and police responded with tear gas.
PM Alexis Tsipras has said he does not believe in the deal, but has urged MPs to agree to the measures.
The vote is expected to pass with opposition help, despite a revolt from some hardliners in the ruling left-wing Syriza party.
Pro-European opposition parties have pledged to vote for the measures.
Hardliners in the ruling left-wing Syriza party are likely to vote against, and the junior coalition party has offered only limited support.
“If I don’t have your support it will be hard for me to remain as prime minister,” Mr Tsipras has told his MPs, as government estimates suggest between 30 and 40 will oppose the measures.
Opponents of the deal took to the streets of Athens ahead of the vote, and unions and trade associations representing civil servants, municipal workers and pharmacy owners held strike action.
More than half of the members of Syriza’s central committee have signed a statement condemning the bailout agreement, describing it as a coup against their nation by European leaders.
The possible bailout was agreed in Brussels on Monday by eurozone members, though one of Greece’s creditors, the International Monetary Fund (IMF), has suggested in a report that it does not go far enough – and that Greece will need some of its debts to be written off.
Greece’s economy has shrunk by 25% in the last five years amid austerity measures designed to curtail its ballooning public sector debt.
In order to begin negotiations over a third bailout worth €86bn (£61bn; $95bn) over three years, Greek MPs need to approve measures including:
- The ratification of the eurozone summit statement
- VAT changes including a top rate of 23% to take in processed food and restaurants and; a 13% rate to cover fresh food, energy bills, water and hotel stays; and a 6% rate for medicines and books
- The abolition of the VAT discount of 30% for Greek islands
- A corporation tax rise from 26% to 29% for small companies
- A luxury tax rise on big cars, boats and swimming pools
- And end to early retirement by 2022 and a retirement age increase to 67
Monday’s announcement of a possible deal was met with anger among many in Greece, who called it a “humiliation”.
Vote risk for Syriza government
The Greek constitution states that a government must have a majority – 151 seats out of 300.
But if it loses a vote, the government can still function in a minority capacity as long as the opposition does not call a vote of confidence and as long as the numbers don’t fall below 121.
The number of anti-bailout MPs is known to be at least 30 within Syriza’s 162-seat coalition.
The question is whether there will be more than 41.
If the numbers go below 121, Prime Minister Alexis Tsipras’s government will be severely damaged and will likely look to opposition parties to join a national unity government.
Mr Tsipras has said he does not believe in the deal, though he agreed to it.
In a television address on Tuesday, he called the proposals “irrational” but said he was willing to implement them to “avoid disaster for the country” and the collapse of the banks.
As parliamentary committees considered the details of the laws, deputy finance minister and Syriza member Nadia Valavani announced her resignation, saying: “I’m not going to vote for this amendment, and this means I cannot stay in the government.”
And tempers flared when former Finance Minister Yanis Varoufakis was heckled with shouts of “You got us here” while addressing one committee.
The jeers came when he said he doubted the deal could work, and compared it to the conditions imposed on Germany in the Treaty of Versailles after World War One.
Meanwhile, French MPs have overwhelmingly backed the Greek bailout deal. Because of their constitutions, several eurozone members, including Germany, must ratify the deal in their parliaments before it can proceed.
Banks stay shut
Greece faces an immediate cash crisis. Banks have been shut since 29 June.
Mr Tsipras has warned banks are unlikely to reopen until the bailout deal is ratified, and this could take another month.
The European Commission has formally proposed a short-term €7bn loan for Greece through the EU-wide European Financial Stability Mechanism (EFSM).
Use of the EFSM for eurozone rescues has been opposed by Britain and other countries which are not part of the euro but are European Union members.
One British official in Brussels told the BBC the UK government had no objection in principle to the use of the EFSM – as long as British taxpayers’ money was ring-fenced from any liability.
Valdis Dombrovskis, a senior European Commission official, said it was working to protect non-euro states from any negative financial consequences should the loan not be repaid.
‘Need for debt help’
The IMF report was written before the eurozone reached a deal with Greece in the early hours of Monday. It was shared with eurozone leaders in advance, but made public only on Tuesday.
It predicts that, in two years’ time, Greek debt will reach close to 200% of GDP (national income) which could “only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far”.
It recommends a “very dramatic extension” on the maturity of Greece’s debts, “with grace periods of, say, 30 years on the entire stock of European debt”.
“Other options,” it says, “include explicit annual transfers to the Greek budget or deep upfront haircuts (debt write-offs)”.
Germany, the largest contributor to Greek rescue funds, and a number of other eurozone countries have long resisted any talk of haircuts and debt relief.
The European Commission published its own assessment on Wednesday, taking a more optimistic view of Greece’s debt sustainability than the IMF but also suggesting debt relief.
The Commission’s report says rescheduling the debt is possible, but only if Greece implements the reforms being demanded by its creditors. It rules out debt write-offs.
Analysis – by Chris Morris, BBC News, Brussels
The IMF report highlights a massive flaw in the deal hammered out so painfully between Greece and the rest of the eurozone: the numbers don’t add up.
It believes that without a restructuring of the Greek debt, it will keep on rising.
But the point about this deal is – once again in the eurozone, it was a case of politics trumping economics.
The desire to keep the eurozone together was stronger (for now) than the economic forces threatening to pull it apart.
There was plenty of talk about debt restructuring during the negotiating process, but not on the scale that the IMF is suggesting.
Officially, there will be a discussion of restructuring only after a first review of the new bailout is successfully concluded.
That is several months down the line.
But, while the IMF report doesn’t comment directly on Monday’s deal (because the report had already been written by then), it certainly implies that the IMF may feel it is unable to take part in the new bailout programme for Greece.
And that would leave a large hole – both in terms of numbers and political credibility.
Greek crisis will shake IMF
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