Greece wins reprieve but tough decisions to follow

Greece's Prime Minister Alexis Tsipras said the deal "cancels austerity" and pledges by the previous government to cut wages, pensions and public sector employees and increase sales taxes. Photo / AP

Greek Prime Minister Alexis Tsipras began the task of selling domestically a provisional deal with eurozone partners to extend bailout funds after securing a reprieve from the prospect of the country's insolvency.

"We won a battle, but not the war as the difficulties, the real difficulties, not only those related to the discussions and the relationship with our partners, are ahead of us," Tsipras said in a televised speech on Saturday.

Talks in Brussels between officials from the 19 eurozone countries concluded on Saturday NZT with an agreement to extend bailout funds to Greece for four months. Tsipras' government must submit a list of economic measures it will undertake today. Finance chiefs will then decide whether his proposals go far enough.

While the agreement potentially frees up some money to meet at least some of the pledges made by Tsipras before last month's election, the outcome may still prove politically bruising for him.

Even after the agreement, his policies are subject to validation by the International Monetary Fund, the European Central Bank and the European Commission, the institutions collectively known as the troika from which Tsipras vowed to break free.

"While Greece secured some ability to rewrite the terms of its current programme, the sense is that the combination of pressure on its banking sector and on state cash flows has forced the bulk of concessions to come from their side," said Malcolm Barr, economist at JPMorgan Chase in a client note. "This may place some degree of strain within Syriza itself."

Tsipras said the deal "cancels austerity" and pledges by the previous government to cut wages, pensions and public sector employees and increase sales taxes. The list of reforms will be "based on the current arrangement", said the Eurogroup meeting of finance ministers. That will include corruption fight, public administration and tax system changes, government spokesman Gabriel Sakellaridis said on Mega TV.

Syriza lawmakers would approve the list of measures even if they didn't fully meet pre-election promises, said George Stathakis, Greek minister for economy, shipping, tourism and infrastructure.

Still, Environment and Energy Minister Panagiotis Lafazanis said in an interview with Real News that Syriza's "red lines won't be violated, that's why they're called red".

The breakthrough removes the threat of the ECB pulling the plug on the nation's banks, a prospect that would have risked Greece crashing out of the euro. Capital controls are now out of the question, according to a eurozone official. Deposit withdrawals from Greek banks reached 20 billion ($30 million) since December.

The deal
Greece and its creditors in the 19-nation eurozone have reached an agreement to extend the country's rescue loans, a move that should dramatically ease concerns it was heading for the euro exit as soon as next month.

The agreement means that Greece will avoid going bankrupt, at least over the four months of the extension. To get the money though, the Greek Government has to present a series of unspecified economic reforms that are deemed acceptable by creditors.