Eurozone Agrees to Four-Month Loan Extension for Greece

Greece backs down and agrees to comply with the conditions of its bailout in order to get more support.

Greece reached agreement with its eurozone creditors on Friday for a four-month loan extension that staves off the prospect of sovereign default and a possible Greek exit from the currency union when its bailout money runs out by the end of this month.

The deal falls short of the six-month extension Greece had requested but should give its new far-left government breathing space to negotiate debt relief — something Northern European countries, including Germany, have ruled out.

Friday’s agreement came after several rounds of talks between eurozone finance ministers during which Greece’s Yanis Varoufakis insisted his country would no longer be tied down to demands for budget cuts and economic reforms.

Varoufakis seemed to have given in on Friday with eurozone officials saying Greece was due to submit a letter on Monday listening the policies it plans to enact during the remainder of the bailout period to ensure compliance.

Germany in particular was adamant that Greece should honor the conditions of its bailout. Finance Minister Wolfgang Schäuble told ZDF television earlier this week, “It’s not about extending a credit program but about whether this bailout program will be fulfilled, yes or no.”

Last month, the Greeks voted the far-left Syriza party into office which promised to reverse the reforms the country has undertaken since 2010 in order to qualify for a total of €240 billion in financial support from other European Union countries and the International Monetary Fund.

Immediately after taking power, Syriza leader Alexis Tsipras, the new prime minister, canceled the privatization of Greece’s largest seaport and its public power utility. He also promised to raise the minimum wage, reinstate pension bonuses and scrap a new property tax, changes that would violate the terms of Greece’s bailout.

Tsipras also wants other European countries to forgive part of Greece’s €315 billion debt, some 90 percent of which is owed to official creditors. Greece’s privately-held debt was already restructured in 2012.