Greek banks will reopen Monday after the ECB boosted emergency aid to the crisis-hit country and eurozone nations agreed to crucial short-term funding, boosting hopes ahead of a key bailout vote in Germany.

European Central Bank chief Mario Draghi said a vital cash lifeline to Greece's struggling lenders would be increased, while also throwing his weight behind IMF calls for debt relief for Athens.

In response, the Greek government announced that banks would reopen on Monday for the first time in almost three weeks, although withdrawals would still be capped at 60 euros ($65) a day.

Athens shuttered banks and imposed capital controls at the end of last month, bringing the economy to a virtual standstill and forcing Greeks to queue for hours for cash.

"From Monday, citizens can go to the bank counters and make any kind of transaction," Deputy Finance Minister Dimitris Mardas told ERT public television late Thursday.

Meanwhile, eurozone ministers approved the launch of bailout talks after lawmakers in Athens grudgingly passed tough reforms to taxes, pensions and labour rules demanded by creditors in the early hours of Thursday morning.

"The Eurogroup welcomes the adoption by the Greek Parliament of all the commitments specified in the Euro Summit statement" reached in marathon talks last weekend, the eurozone's finance ministers said.

The European Commission, the bloc's executive arm, also agreed in theory to grant Greece a three-month 7.0-billion-euro ($7.6 billion) bridging loan to keep its economy afloat until its new bailout is ratified.

The moves came as German lawmakers will on Friday interrupt their summer holiday to vote on granting the government a mandate to negotiate the details of the new aid package.

On the eve of the vote, German Chancellor Angela Merkel urged conservative lawmakers to back the deal, saying she was "absolutely convinced" it was the way forward.

- Syriza 'bruised' by vote -

Greek Prime Minister Alexis Tsipras on Wednesday faced down a major mutiny in his radical left Syriza party and violent protests in the streets of Athens to win parliamentary approval for the draconian reforms demanded in return for a new 86-billion-euro bailout package.

Tsipras said the 32 MPs from his own Syriza party who had voted against the package had contradicted "the principles of friendship and solidarity at a critical time," and left the party "bruised," a government source quoted him as saying.

But the Eurogroup, led by the no-nonsense Dutch Finance Minister Jeroen Dijsselbloem, was encouraged by the outcome.

Dijsselbloem said the raft of reforms approved by the Greek parliament were a first step to "start to rebuild trust" as he called for urgent foreign investment to help boost Greece's debt-ridden economy.

A spokeswoman for the European Commission said the vote was "an important step toward rebuilding trust with Greece's international partners".

The EU's executive arm also green-lighted a bridging loan for Greece through an EU-wide crisis fund to hold Athens over until its new bailout is ratified.

Non-euro Britain had resisted the use of this fund, but said late Thursday it had dropped its objection after reaching a deal that would protect it and other countries outside the single currency against potential losses.

A compromise agreement was expected to be finalised on Friday.

"These have been tough talks, but the agreement announced this evening means an impregnable ring-fence around British taxpayers' money, which will not be at risk in any way in this emergency financing for Greece," British finance minister George Osborne said.

- 'We will be repaid' -

In Frankfurt, the ECB said the conditions were "in place" to raise the Emergency Liquidity Assistance (ELA) ceiling despite questions about the solvency of Greece's banks.

The ELA -- which has kept Greek banks, and by extension the Greek economy, afloat -- has been fixed at around 89 billion euros ($99 billion) since late June, but would be topped up with an additional 900 million euros, Draghi said.

Athens has failed to make a key debt repayment to the International Monetary Fund, and its next debt deadline is a 4.2-billion-euro payment to the ECB itself on July 20.

Draghi was adamant that Athens would repay its debts to both the ECB and the IMF, declaring confidently that "on 20 July, we will be repaid".

But he also said Greece -- whose debts amount to 180 percent of economic output -- would need some sort of debt relief, but the question was on what form it could take.

The IMF, one of Greece's creditors alongside the EU and the ECB, caused a stir with a bombshell report criticising the deal and warning that lenders would have to go "far beyond" existing estimates for debt relief.

But for Greece's biggest European paymaster, Germany, a pure and simple writeoff is still seen as a no-go.

"A real debt haircut is irreconcilable with membership in a monetary union," hardline Finance Minister Wolfgang Schaeuble insisted on Deutschlandfunk public radio.

Several other eurozone parliaments have already backed fresh aid to Greece. France gave its green light on Wednesday, and Finland on Thursday approved the bridge financing plan and for talks on a third bailout deal.
Source: AFP