Europe has agreed to extend its financial lifeline to Greece by four months from the end of February.
The deal struck by finance officials at talks in Brussels should keep Greece afloat and safely in the euro while it works out a longer term plan for the economy.
But Greece still needs to come up with a list of reforms acceptable to its creditors, including the International Monetary Fund and the European Central Bank, by Monday for the massive bailout to be extended beyond the end of the month. The list will need to be agreed upon by the various institutions involved by April.
“The Greek authorities will present a first list of reform measures, based on the current arrangement, by the end of Monday February 23. The institutions will provide a first view whether this is sufficiently comprehensive,” eurozone finance ministers said in a statement.
Without an extension of support, Greece risked a run on its banks and would have had trouble paying its bills.
Two previous attempts to secure an agreement in the last 10 days have failed.
In order to secure continued support, the new left-wing Greek government appears to have backpedaled significantly on its initial demands.
It has pledged to honor its commitments to all creditors — mainly other European governments and institutions such as the European Central Bank — and to work within the framework of a program it had condemned for killing the country’s economy.
In return, its eurozone creditors have pledged to use existing flexibility within the bailout program to make the burden less onerous.
Dutch finance minister Jeroen Dijsselbloem, who chaired the emergency talks, hinted that Europe could allow Greece to deliver a smaller budget surplus (before debt repayments) this year to take account of economic conditions.
The euro gained ground on news of the deal. European stocks have largely taken the uncertainty over Greece’s fate in their stride.
That’s because a Greek exit from the eurozone — or Grexit — is a much less scary prospect for markets than five, or even three years ago, when previous episodes in the country’s debt crisis shook confidence in the currency.
“All things considered, we believe that a Grexit would not lead to a degree of direct contagion that would drive other sovereigns out of the euro, not least because the eurozone rescue architecture is more robust than during the last Grexit scare in 2012,” said Standard Poor’s credit analyst Moritz Kraemer.