EU extends Greece's deadline for financial reforms, preventing 'Grexit'

Eurozone finance ministers agreed in principle on 20 February to extend heavily indebted Greece's financial rescue by four months, averting a potential cash crunch in March that could have forced the country out of the currency area.

The deal is to be ratified once Greece's creditors are satisfied with a list of reforms it will submit next week.

"Yesterday, we received a request letter from the Greek authorities for an extension of the agreement, the MFFA (Master Financial Assistance Facility Agreement) for four months. Actually they requested for six months, but our decision is to extend it for four months," Jeroen Dijsselbloem, chairman of the 19-nation Eurogroup, told a news conference.

The agreement has ended weeks of uncertainty over the fate of Greece, since the election of Syriza – the radical left-wing, anti-austerity political party, which pledged to reverse austerity measures.

The agreement was clinched after the third ministerial meeting, held during two weeks of acrimonious public exchanges between Greece's new ministers, the Troika – European Commission, International Monetary Fund (IMF) and European Central Bank (ECB) – and EU governments.

The deal means the Greek government has more time to negotiate a relaxation of its debt relief package. But it forces Prime Minister Alexis Tsipras into a major political climbdown.

During the election campaign, Tsipras vowed to scrap the bailout, end cooperation with the Troika, and roll back austerity policies the previous administration agreed to in exchange for bail-out funds..

The Greek authorities have committed to "refrain from any roll back of measures and unilateral actions that would negatively impact fiscal targets, economic recovery or financial stability", Dijsselbloem said.

The accord requires Greece to submit a letter to the eurogroup (the finance ministers of the eurozone) by Monday, 23 February, listing all the policy measures it plans to take during the remainder of the bail-out period.

If the Troika are satisfied after an initial view, eurozone member states will ratify the extension, where necessary through their parliaments.

"We are very pleased that work can actually begin. The first thing that happens is before close of business on Monday, the Greek authorities are expected to deliver a list of reforms which they expect to deliver in line with what has been previously agreed," said the IMF's managing director Christine Lagarde.

EU Economics Commissioner Pierre Moscovici said Greece will have to address issues such as economic competitiveness and effective tax administration.

"Good faith is a major issue here if we want to really build trust about this situation, but also with a necessary sense of urgency in order to reach a global and permanent agreement," Moscovci said.

Greece's €240bn (£177.45bn) EU/IMF bailout programme was due to expire on 28 February.