European leaders agreed Friday to extend Greece’s bailout for four months after weeks of tense negotiations.
The deal, reached at an emergency meeting of eurozone finance ministers, paves the way for Greece to unlock further financial aid from a 240 billion euro bailout deal — about $273 billion — provided the country meets certain commitments laid out by its creditors.
“I’m glad to report to you that the work has paid off,” Jeroen Dijsselbloem, the head of the eurogroup of finance ministers, said at a news conference. “We have established common ground again.”
The new agreement will require the two sides to continue to work through their differences.
For one thing, Greece will not receive any of a 7 billion euro installment from the bailout until it has carried out all remaining reforms required by creditors, some of which Greek Prime Minister Alexis Tsipras had pledged to roll back. Greece must also show that it is not abandoning austerity measures unilaterally.
That means that if Athens moves slowly, it might not get the money for months.
The deal is likely to give Greece breathing room. For one, it could help stem flights of deposits from the country’s banks, which have been bleeding money amid the standoff between Greece and its creditors.
But it will hardly move the country past the worst of its economic and financial troubles. The economy has shrunk by a quarter in the last five years, and unemployment stands at more than 25 percent.
Still, the agreement represents a breakthrough in the impasse that rattled the markets and raised questions about the future of the common currency zone.
The major sticking point has been how closely Greece is prepared to abide by the tough conditions underpinning its bailout loans. Tsipras’ new left-leaning government was voted into power last month on an anti-austerity platform. For weeks, Greece has pushed to ease the more onerous terms of the bailout.
But Germany and other major creditors have insisted that Greece stick with the commitments of its original bailout. Germany, as well as countries such as Finland, have been reluctant to risk more taxpayer money by lending it to Greece. Other countries, including Ireland and Portugal, which have hewed to their own austerity-pegged bailout programs, have insisted that Greece do the same.