Greek parliament approves EFSF expansion

Greece's parliament passed a law on Wednesday to expand the powers of the European Financial Stability Facility (EFSF), which render the euro zone's bailout fund more flexible.

The 300-seat house approved the legislation in principle and is set to rubber stamp it with a vote article-by-article in the coming days to put the law into effect.

The EFSF increase the rescue fund's effective lending capacity to 440 billion euros ($603 billion) and allow it to lend euro zone governments money to recapitalise their banks.

The fund is also empowered to provide precautionary loans to countries under attack in the markets and to buy sovereign bonds.

The bill was approved by 183 of the house's 300 seats, with 38 voting against and the rest not casting ballots. Deputies of the main conservative opposition voted in favour.

The EFSF's new powers need to be approved by all of the euro zone's 17 member states to enter into force.

Under its current structure, the EFSF issues bonds guaranteed by euro zone member states to raise funds from the debt market that it then uses to lend to those receiving financial aid.

Roughly 140 billion euros of its capital has already been committed to Portugal and Ireland or earmarked for a likely second bailout programme for Greece, meaning that its capacity already has a fairly limited threshold.