European shares hit their highest level in almost four weeks on Thursday after Greece's parliament passed a final vote on austerity measures, boosting market confidence that the country can pay its bills in the short-term. The Greek parliament approved detailed austerity and privatisation legislation, moving a step closer towards securing a 12 billion euro financial aid package from the European Union and the International Monetary Fund.
The pan-European FTSEurofirst 300 index of top shares closed 1.1 percent higher at 1,110.97 points, and hit its highest intraday level since June 3 at 1,110.45 points. The Greek vote "draws a bit of a line in the sand for Greece in the immediate term, because it paves the way for the EU and the IMF to give them the next tranche of loans," said Joshua Raymond, market strategist at City Index.
German financial institutions look set contribute 3.2 billion euros, although the details still have to be finalised, Germany's finance minister said. The Greek vote and emergence of German financials' support for the bailout had "raised a degree of optimism that whilst the market has come off a lot over the last couple of weeks that maybe it's a bit oversold and there's a chance for some short-term buying momentum," Raymond said.
The approval, however, is seen as a short-term solution for Greece, with credit markets still pricing in an 80 percent chance of Greece defaulting on its 340 billion euro debt mountain within five years. European banks rose, with the STOXX Europe 600 banking index up 2 percent.
UK bank Lloyds was up more than 9 percent, after its new boss announced plans to cut 15,000 jobs and halve its international presence to help revitalise the British bank. The equity market also received a lift from upbeat US data on business activity in the Midwest region which showed a better-than-expected reading in June.
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