Greece faces further hurdles and delays before it gets its second €130 billion bailout in spite of parliament agreeing further cuts in the face of violent protests.
The European Union called the approval a "crucial step forward" but added that it would still take some time before the second bailout is delivered.
Germany's finance ministry said the country will not give its final approval for the new aid payments until early March - after there is clarity on how well a debt relief deal with private bond holders would work and its parliament has
voted on the new measures.
EU economic and monetary affairs commissioner Olli Rehn told reporters in Brussels he is "confident" Greece will meet the conditions necessary for the second bailout to win approval when finance ministers from the 17 euro countries meet in Brussels on Wednesday.
Pushing the new bailout back for several weeks underlines how much distrust has built up against Greece over the past two years, when many promised cuts and reforms were passed in parliament but never actually implemented.
But it also means that Greece, its citizens and the rest of the world economy will not know for several weeks whether the country can avoid a potentially disastrous default.
Greece's political leaders struggled over the weekend to get new far-reaching austerity measures through parliament ahead of the finance ministers' meeting. The drastic cuts debated yesterday included cutting one in five civil service jobs over the next three years and slashing the minimum wage by 22 per cent.
As Greek MPs voted on the new cuts, the streets of Athens and other cities were rocked by violent protests. In Athens, at least 45 buildings were burned while dozens of shops and businesses were smashed and looted.
Police arrested at least 74 people and detained a further 92, while in several cases they had to escort fire crews to burning buildings after protesters prevented access.
The new rescue loans are needed to prevent the country from a potentially catastrophic default next month - a bankruptcy that could push Greece out of the euro currency union, drag down other troubled euro zone countries and further disturb global markets. However, the Greek parliament's vote has not brought an end to the uncertainty.
Apart from some technical decisions, several key issues remain.
It is unclear whether the new spending cuts, the debt relief deal and the new bailout will be enough to bring Greece's debt burden down to 120 per cent of economic output by 2020 - the maximum its international creditors perceive as sustainable.
Several weeks ago, the EU estimated that there was still a financing gap. There is hope that the European Central Bank, which also holds a significant amount of Greek debt can help close that gap by forgoing profits on those bonds.
The other 16 countries that use the euro are still waiting for the leaders of Greece's two main political parties to commit in writing to implementing the new austerity measures even after elections expected for April. Both the Socialists and the centre-right New Democracy party backed the package in the parliamentary vote.
National parliaments in Germany, Finland and the Netherlands will have to vote on the second bailout package. Since those countries are traditionally most critical of bailouts, the votes are unlikely to happen before there is clarity on whether the bailout deal will actually make Greece's debt sustainable again.
Germany's insistence on taking more time to decide whether it is willing to send more bailout money to Greece means the final decision on the rescue loans will have to be split from a related deal with the country's private bondholders designed to slice some €100 billion off Greece's debt.
The bond swap with private investors has to be launched this week so that it can be completed ahead of March 20th, when Greece has to redeem some €14.5 billion in bonds. The debt deal would see banks and other investment funds exchange their old Greek bonds for new ones with half the face value, lower interest rates and longer repayment deadlines.
The finance ministers from the other 16 euro zone countries could give Greece the green light to make the swap offer to investors at their meeting on Wednesday, which would give investors several weeks to decide whether to participate. Before that can happen, the ministers will want to written assurances from the Greek party leaders on implementing the austerity measures as well as a clear plan for saving an extra €325 million.
Last night, Greek prime minister Lucas Papademos, a technocrat brought in to get a grip on the crisis, denounced the worst breakdown of order since 2008, when violence gripped Greece for weeks after police shot a 15-year-old schoolboy.
"Vandalism, violence and destruction have no place in a democratic country and won't be tolerated," he told parliament as it prepared to vote. "But he admitted that imposing the austerity on a nation that has already endured several years of cuts would be tough.
“The full, timely and effective implementation of the programme won't be easy. We are fully aware that the economic programme means short-term sacrifices for the Greek people," Mr Papademos said.
Outside parliament chaos reigned. Many buildings in Athens were engulfed in flames and huge plumes of smoke rose in the night sky. The air in Syntagma Square outside parliament was thick with teargas as riot police fought running battles with thousands of youths who smashed marble balustrades and hurled stones and petrol bombs.
Terrified Greeks and tourists fled the rock-strewn streets and the clouds of stinging gas, cramming into hotel lobbies for shelter as lines of riot police struggled to contain the mayhem.
State NET television reported that trouble had also broken out in Heraklion, capital of Crete, as well as the towns of Volos and Agrinio in central Greece.
On the streets of Athens many businesses were set ablaze, including the neo-classical home to the Attikon cinema dating from 1870 and a building housing the Asty, an underground cinema used by the Gestapo as a torture chamber during the second World War.
Agencies