Eurozone finance ministers reached an agreement yesterday to extend heavily-indebted Greece’s financial rescue by four months, officials on both sides said.
“It’s done. For four months,” one said.
An agreement removes the immediate risk of Greece running out of money next month and possibly being forced out of the single currency area.
It provides a breathing space for the new leftist-led Athens government to try to negotiate longer-term debt relief with its official creditors.
European Union paymaster Germany, Greece’s biggest creditor, had demanded “significant improvements” in reform commitments by Athens before it would accept an extension of eurozone funding.
Eurozone officials said the accord required Greece to submit by Monday a letter to the Eurogroup listing all the policy measures it planned to take during the remainder of the bailout period to ensure they complied with conditions.
Officials said an outline deal was reached in preparatory talks involving the Greek and German finance ministers as well as the managing director of the IMF.
It was then agreed by the full 19-member Eurogroup, ending weeks of uncertainty.
It’s done. For four months
With the €240 billion EU/IMF bailout programme due to expire in little more than a week, Greek Prime Minister Alexis Tsipras voiced confidence of an agreement despite objections to the request made in a letter to Eurogroup chairman Jeroen Dijsselbloem.
“I feel certain that the Greek letter for a six-month extension of the loan agreement with the conditionalities that accompany it will be accepted,” Tsipras said in a statement to Reuters before the crucial Brussels meeting. Officials said Greece’s partners requested the shorter period.
A report by German magazine Der Spiegel that the European Central Bank was making contingency plans for a possible Greek exit from the currency area if the talks fail, on which the ECB declined to comment, highlighted the high stakes.
German Chancellor Angela Merkel, speaking after talks in Paris, said all EU partners wanted to keep Greece in the euro but added: “There is a need for significant improvements in the substance of what is being discussed so that we can vote on it in the German Bundestag, for example next week.”
The Greeks won sympathy from Italian Prime Minister Matteo Renzi. “I believe that the principle of doing reforms in exchange for more time is just and correct,” he said after a meeting of his government in Rome.
After preliminary talks with Greek Finance Minister Yanis Varoufakis, German Finance Minister Wolfgang Schaeuble and International Monetary Fund chief Christine Lagarde, Mr Dijsselbloem said there was “reason for some optimism” but the search for agreement remained very difficult.
Finance ministers arriving from other eurozone states had lined up to insist on more guarantees for creditors that Greece will fulfil the bailout’s strict conditions on budget discipline and economic reforms to win their agreement. Athens is determined to loosen austerity.
Greece could run out of money by the end of March without new external funds, people familiar with the figures say.