Greece's parliament was expected to endorse a debt swap with private bondholders on Thursday that forms the core of its 130-billion-euro bailout, despite new protests against tough budget cuts demanded in return for the rescue deal.
The swap, in which private investors exchange their bonds for lower-value debt, will slice 100 billion euros ($132 billion) off Greece's debt, a vital part of the EU and IMF rescue plan aimed at cutting Greece's liabilities from 160 percent of gross domestic product to 120.5 percent by 2020.
Greece's second bailout since 2010 was approved by euro zone finance ministers on Tuesday, averting the immediate threat of a messy bankruptcy next month but doing little to allay deep doubts about the country's long-term financial and social stability.
With the ruling alliance of Socialist PASOK and conservative New Democracy having a comfortable majority in parliament, there is little suspense over the passage of legislation which already went swiftly through the committee stage on Wednesday.
But new protests are planned on Thursday against 3.3 billion euros of budget cuts this year demanded in return for the rescue package, and left-wing parties opposed to the austerity package are gaining in opinion polls before elections likely in April.
You put the debt swap in front of us like a piece of cheese on a mousetrap, which is 10 years of hardship, Dimitris Papadimoulis of the Left Coalition party told parliament.
Doctors and health workers joined the wave of public anger on Thursday, launching a 24-hour strike over pay cuts and calling a protest outside the Health Ministry. Hospitals were maintaining a minimum level of service.
We condemn the policy of the government, the EU and the IMF, which is demolishing the state healthcare and killing its personnel, hospital doctors from Athens and the port city of Piraeus said in a statement.
The exact timing of the final vote on Thursday was unclear.
The government says the offer must be made to bondholders by Friday and completed by March 12, before a March 20 deadline when 14.5 billion euros of debt repayments fall due.
Private investors holding about 200 billion euros of Greek bonds will take a loss of 53.5 percent in the face value of their holdings and a real loss of 73-74 percent.
The legislation says investors get at least 10 days to consider the transaction and creates so-called collective action clauses (CACs), which force all bondholders to proceed with the swap once it has won a specified level of approval.
According to the draft law, the swap will go ahead once a 50 percent quorum of bondholders have responded to the offer and the CACs will be activated once a two-thirds majority of that quorum have voted in favor of the swap.
The austerity measures have helped to plunge Greece ever deeper into recession and driven unemployment up over 20 percent. Half of young Greeks are jobless.
The bailout deal buys time to stabilize the 17-nation euro zone currency bloc and strengthen its financial protection against a messy Greek default, which is a long-term threat.
Credit ratings agency Fitch downgraded Greece further to C from CCC on Wednesday. The move was expected as Greece passes into technical default on its liabilities once the debt swap transaction is completed.
The euro zone, and particularly its northern members led by EU paymaster Germany, are deeply skeptical that Greek leaders will stick to the painful spending cuts and reforms after the election.
A new survey by pollster VPRC for the Epikera magazine on Thursday showed 76 percent of respondents believed Germany was on balance rather hostile to Greece, and 73 percent said they had a negative attitude towards Chancellor Angela Merkel. The telephone survey was taken from a sample of 805 people.
Greece must adopt a series of laws in the coming days needed to implement cuts to public sector spending and pensions to clinch the funds.
Officials from the International Monetary Fund said the lender was weighing up the size of its contribution given that Athens is near the limits of what it is allowed to borrow.
European and IMF sources have told Reuters the Fund could contribute 13 billion euros in new money on top of 9.9 billion still unpaid from the first bailout.
The United States, the biggest contributor to the IMF, welcomed the bailout deal, but said on Wednesday that Europe should do more to prevent any risk of contagion.
We believe that the IMF should continue to play a constructive role in Europe, but IMF resources cannot be a substitute for a strong and credible firewall, Lael Brainard, the U.S. Treasury Department's under secretary for international affairs, said before a Group of 20 meeting this weekend. ($1 = 0.7552 euros)
(Additional reporting by Lesley Wroughton in Washington; Writing by Mark John; editing by David Stamp)