Greece appeared to step back from the prospect of a devastating debt default yesterday after its prime minister quelled chaotic political infighting and Germany softened a demand on a new European bailout.

After two days of dissent inside his Socialist party that threatened to bring down his government, Prime Minister George Papandreou named his main internal rival as finance minister. The move is expected to solidify the support from lawmakers Papandreou needs to pass a $39.5 billion package of steep tax hikes and budget cuts so despised inside Greece that riots exploded outside parliament this week.

European donors and the International Monetary Fund require Greece to pass the austerity measures before releasing the next $17 billion loan from a $157 billion package to keep Greece afloat until it it can get its struggling economy back on track.