(Reuters) – Euro zone finance ministers agreed in principle on Friday to extend heavily indebted Greece’s financial rescue by four months, averting a potential cash crunch in March that could have forced the country out of the currency area.
The deal, to be ratified once Greece’s creditors are satisfied with a list of reforms it will submit next week, ended weeks of uncertainty since the election of a radical leftist-led government in Athens pledged to reverse austerity measures.
“Tonight was a first step in this process of rebuilding trust,” Jeroen Dijsselbloem, chairman of the 19-nation Eurogroup, told a news conference. “We have established common ground again to reach agreement on this statement.”
The agreement, clinched after the third ministerial meeting in two weeks of acrimonious public exchanges, offers a breathing space for the new Greek government to try to negotiate longer-term debt relief with its official creditors.
But it also forced radical young Prime Minister Alexis Tsipras into a major political climbdown since he had vowed to scrap the bailout, end cooperation with the so-called “troika” of international lenders and roll back austerity.
“It has been a laborious but eventually a constructive process,” International Monetary Fund managing director Christine Lagarde said.
A Greek government official said “Greece has turned the page” and won a breathing space to negotiate a new deal.
European Union paymaster Germany, Greece’s biggest creditor, had demanded “significant improvements” in reform commitments by Athens before it would accept an extension of euro zone funding.
The accord requires Greece to submit by Monday a letter to the Eurogroup listing all the policy measures it plans to take during the remainder of the bailout period, to ensure they comply with the conditions.
If the European Commission, the European Central Bank and the IMF are satisfied after an initial view, euro zone member states will ratify the extension, where necessary through their parliaments.