Greece has avoided imminent bankruptcy after its international creditors finally agreed to give it the money it urgently needs but the cash-strapped country's economic distress is likely to drag on for years to come.
After three weeks of negotiations, Greece's euro partners and the International Monetary Fund agreed to release vital loan payments totaling some $57 billion and introduce a series of measures designed to reduce the country's massive debts to a more manageable level within a decade. These include reducing the interest rates Greece has to pay on the loans and a bond buyback program.
Greek Prime Minister Antonis Samaras hailed the agreement as a victory that heralds "a new day for all Greeks," but the reaction in the markets was a bit more cautious.
Most stock markets in Europe were modestly higher. The Stoxx 50 index of leading European shares was up 0.4 per cent, but the main stock index in Athens fell 1.4 per cent as investors had hoped for some more debt relief for the country. The euro also gave up earlier gains to trade 0.4 per cent lower at $1.2947.
"There remains the potential for this deal to fall apart in the medium term as there are a lot of moving parts and it is a long way away from the permanent fix that the IMF had been insisting upon," said Gary Jenkins, managing director of Swordfish Research. "Instead it is just one more big kick of the can down the road."
For three years, Greece has been struggling to convince markets as well as its creditors that it can get a grip on its public finances, which spiraled out of control. The country is predicted to enter its sixth year of recession and is weighed down by an unemployment rate of 25 percent.
The so-called troika of the European Central Bank, IMF and the European Commission has twice agreed to bail out Greece, pledging a total of $310 billion in rescue loans - of which the country has received about $195 billion so far. In return for its bailout loans, Greece has had to impose several rounds of austerity measures and submit its economy to scrutiny.
Without the bailout money, the country would be staring bankruptcy in the face together with a possible exit from the 17-country eurozone, with potentially chaotic repercussions for the world economy.
The meeting agreed to release 34.4 billion euros in loans to Greece in December, with the remainder issued in three installments in the first quarter of 2013. The money will be used to help recapitalize Greece's struggling banking industry and pay back suppliers.