ECONOMY

‘Vital step back’ from default

The Greek Parliament?s approval of a 28-billion-euro austerity package on Wednesday is a ?vital step back? from a debt default, European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy said in a joint statement.

The EU had threatened to block a 12-billion-euro payout from Greece?s 110-billion-euro bailout unless the lawmakers agreed to more spending cuts and tax hikes.

The focus now shifts to a second vote today to put the measures in motion and to a meeting Sunday of eurozone finance ministers to plan a second bailout for Greece.

?Tomorrow, the eyes of Europe will again be turned towards Athens,? the leaders said. ?A second positive vote would pave the way for the disbursement of the next tranche of financial assistance.?

In a separate statement, Jean-Claude Juncker, president of the Eurogroup of finance ministers, said he was ?relieved? by the vote and appealed to Greek political forces to work together. ?It?s a time for collective responsibility and national unity. It is only in combining all their efforts and all their talent that the Greeks will overcome this crisis.?

In response to the government passing the first part of the austerity plan, Greek bonds jumped, leading gains in the securities of the euro region?s most indebted nations.

Greek two-year note yields sank 123 basis points to 27.32 percent. The 4.6 percent security due May 2013 soared 1.32, or 13.20 euros per 1,000-euro face amount, to 69.63. The 10-year yield slid 17 basis points to 16.29 percent, driving the difference in yield with 10-year bunds 22 basis points lower to 1,330 basis points, or 13.30 percentage points.

?The defining moment will be when the European Union announces both the size of the Greek assistance package and the terms and conditions,? Mark Grant, managing director at Southwest Securities Inc in Fort Lauderdale, Florida, told Bloomberg.

?The ratings agencies, if they are to be believed, will view the ?rollover? as a default and then, if that happens, all hell will break loose.?

Greece?s 10-year yield has jumped more than 3.5 percentage points this quarter as euro-region policymakers struggled to contain the debt crisis.