Greece wins 4-month bailout reprieve

Yanis Varoufakis, right, with his counterparts Luis de Guindos Jurado, left, and Michel Sapin. Picture: Getty

Eurozone finance ministers reached an agreement to extend Greece’s financial rescue by four months. Dutch finance minister Jeroen Dijsselbloem, head of the Eurogroup – a meeting of the finance ministers of the eurozone – said that Athens had pledged to honour all its debts.

“This is a very positive outcome,” he said last night.

“I think tonight was a first step in this process of rebuilding trust. As you know trust leaves quicker than it comes. Tonight was a very important, I think, step in that process.”

In return, Greece has committed to not pursue any “unilateral” measures that might affect the country’s budget targets. Greece has committed to provide a list of reforms based on its current bailout program for assessment on Monday.

The review will be carried out on Tuesday by representatives from the European Central Bank, International Monetary Fund and European Commission.

“The institutions will provide a first view whether this is sufficiently comprehensive to be a valid starting point for a successful conclusion of the [bailout] review,” according to the eurozone statement on Greece.

If the institutions don’t think the proposals are enough, Greece would be facing financial trouble again. Its current bailout expires on 28 February. The proposals will be elaborated on and agreed upon by the end of April.

A statement from Eurogroup said: “The Eurogroup reiterates its appreciation for the remarkable adjustment efforts undertaken by Greece and the Greek people over the last years.

“During the last few weeks, we have, together with the institutions, engaged in an intensive and constructive dialogue with the new Greek authorities and reached common ground today.

“The Eurogroup notes, in the framework of the existing arrangement, the request from the Greek authorities for an extension of the master financial assistance facility agreement (MFFA), which is underpinned by a set of commitments.

“The purpose of the extension is the successful completion of the review on the basis of the conditions in the current arrangement, making best use of the given flexibility which will be considered jointly with the Greek authorities and the institutions. This extension would also bridge the time for discussions on a possible follow-up arrangement.”

The deal removes the immediate risk of Greece running out of money next month. It also provides a breathing space for the new Greek government to try to negotiate longer-term debt relief with its EU creditors.

The breakthrough helped global markets, with the euro and stock markets in the US rising.

Yesterday’s meeting was delayed by four hours as the finance ministers worked in clusters, where details of the statement were discussed.

The developments come a day after Athens requested a six-month loan extension, which would allow Greece to pay its bills and avoid an eventual bankruptcy.

The Greek government, effectively just a week away from having to fend for itself, tried to show its creditors in the 19-country eurozone that its request for an extension was sincere and not just a ruse – a Trojan horse – according to one official in Germany to buy time.

Its proposals met with an array of initial reactions. While some countries said they were a step in the right direction, others were more negative. In a major rebuff, Germany had said the proposals, which included commitments to meet debt obligations and sustain a degree of budgetary discipline, failed to go far enough.