Euro-area finance ministers reached a provisional deal intended to keep aid flowing to Greece in return for a commitment to continued economic reforms, buying time to work out the detail of longer-term Greek financing.
Talks in Brussels between officials from the 19 euro-area finance officials concluded Friday evening with an agreement to extend bailout funds to Greece for four months. In return, on Monday Prime Minister Alexis Tsipras's government must submit a list of reform measures it will undertake. Finance chiefs will then decide whether the Greek measures go far enough.
“It's an important first step,” Irish Finance Minister Michael Noonan told reporters after the meeting. “We'll see if it's enough on Monday night, Tuesday morning.”
U.S. stocks rose, sending benchmark indexes to records, on the prospect of an easing in the standoff between Greece and its creditors, a breakthrough that reduces the immediate risk of Tsipras's government running out of cash as early as next month. The euro swung between gains and losses as the hurdles still ahead became clear.
The text of the agreement allows Greece to lower previously agreed targets on reaching a primary budget surplus, potentially freeing up some money to meet at least some of Tsipras's election pledges. A Greek official said that tax increases and cuts to pensions had been averted in the accord.
“Our commitments are commitments we would want to make anyway,” Greek Finance Minister Yanis Varoufakis told reporters. “Sometimes like Ulysses you need to tie yourself to a mast in order to get where you're going and avoid the sirens.”
Troika Ratification
The deal removes the threat of the European Central Bank (ECB) pulling the plug on the nation's banks, a prospect that would have risked Greece crashing out of the euro. The next major financial hurdle comes next month, when the government must service 2.2 billion euros (US$2.5 billion) of debt to the International Monetary Fund, with the treasury's coffers nearly exhausted.
The outcome may still prove politically bruising for Tsipras and his Syriza party since the Greek reform measures are subject to validation by the IMF, the ECB, and the European Commission, the institutions collectively known as the “troika,” from which Tsipras vowed to break free.
“We agreed that the institutions examine exactly whether the new list corresponds to the requirements of the program,” said Austrian Finance Minister Hans Joerg Schelling. “If the institutions do that, we will approve the extension of the program.” If they deem the steps to be insufficient, a finance ministers' meeting will be called “immediately,” he said.
Finance ministers will hold a conference call Tuesday to discuss the Greek response, after which the deal would be put to national parliaments next week.
While a deal might go some way to help repair the frayed ties between Greece and Germany, the biggest European contributor to Greece's 240 billion-euro bailouts and the chief proponent of economic reforms in return, it must still be approved by German lawmakers.
–With assistance from Marcus Bensasson and Nikos Chrysoloras in Athens and James G. Neuger, Corina Ruhe, Rainer Buergin, Radoslav Tomek, Karl Stagno Navarra and Jeff Black in Brussels.
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