Greece has been given the greenlight as the Eurogroup approved Athens’ reform plans, taking it a step closer to securing a four-month loan extension.
It cannot be a unilateral decision of the government involved to say "We are no longer committed to this target."
The deal was sealed in a one hour telephone conference in Brussels, but the international creditors made clear that Greece couldn’t walk out on its commitments.
“If economic circumstances so require, fiscal targets can be adjusted within programmes – and have been adjusted in the past,” said Eurogroup President Jeroen Dijsselbloem. “But it cannot be a unilateral decision of the government involved to say “We are no longer committed to this target.” That is not the way it can work,” he added.
The deal which would avert a financial meltdown will have to be ratified by some national parliaments in the coming days.
Greek Finance Minister Yanis Varoufakis was forced to backpedal on election promises of halting privatisation, raising the minimum wage and increasing welfare spending in order to get the approval from the EU-IMF creditors.
Could do better
But there may be even tougher negotiations to come over the longer-term financial situation. IMF chief Christine Lagarde said the reforms were ‘not very specific’ and they would require clearer reforms on pensions, taxation and privatisation.
ECB chief Mario Draghi said the reforms were “sufficiently comprehensive” to act as a “starting point for a successful conclusion of the review”.
The six-page letter from the Greek Finance Minister detailing reforms contained few figures but pledged to improve tax enforcement, stamp out corruption and review government spending.
The Greek markets rallied strongly with the news that a crisis had been averted for now.
Greece expects to start talks to discuss its funding gap with the EU-IMF partners within the next few days, the finance ministry said. Greece must repay and IMF loan of around 1.6 billion, it then requires 0.8 billion euros for interest payments in April and 7.5 billion in July and August for maturing bonds held by the European Central Bank (ECB).