Eurozone finance ministers have approved a Greek proposal aimed at reducing economic hardships in Greece, a move that could lead to Athens receiving a pivotal bailout extension before Saturday. If national governments support the proposal, Greece will have taken a critical step toward remaining in the eurozone.
Eurogroup President Jeroen Dijsselbloem said on Tuesday that Greece’s reform proposal was received late Monday, and that the Greek government had demonstrated an "unequivocal commitment to honor its financial obligations.”
"I think they are serious, but it is not going to be easy," he said. "This is just a first step. And it is going to take time to really get into the details and to design a new contract or agreement which will carry us on for four months.”
On Tuesday, the finance ministers approved the proposal, which will now be put forward to national governments for agreement before Saturday, when Athens’ nearly $300 billion bailout program is due to expire.
If Greece fails to win the extension, it could face insolvency and risk having to leave the single currency union.
On Tuesday, many Greeks said they felt hopeful. A 70-year-old Greek said he is modestly optimistic that Greece will be able to remain in the eurozone, but that the problems cannot be solved easily.
Another unemployed citizen said this is the first government to negotiate real progress for Greece. She said, however, she is only cautiously optimistic.
Greece has been trying to negotiate changes to its loan program since the leftist Syriza party took power in January on a campaign pledge to end Greece’s stringent bailout terms. Germany and other European countries have demanded that Athens live up to its original commitments.
In its new reform proposals submitted on Monday, Athens pledged to take a disciplined approach to budgets, spending and tax collection. The government said it aims to ease Greece’s “humanitarian crisis,” which has been caused by years of economic hardship and high unemployment, but that this will not impact the government’s budget.
Spyros Economides, from the London School of Economics, said Tuesday’s developments could signal a short-term gain for Greece, but there is still a long way to go.
Current negotiations, he said, will only keep Greece afloat for another four months.
“If at the end of the four-month period, the European Union, the European Central Bank, and the IMF are satisfied that Greece has made advances, they will sit down and negotiate a new bail-out agreement or some kind of new deal to finance Greece's repayment of its debts,” he said.
He added that Greece, and other eurozone countries, are still far from being on safe economic ground.
“Things can get out of control. Accidents do happen," he said. "And there could be a series of incidents, which could lead to a country like Greece leaving the eurozone.”
International Monetary Fund Managing Director Christine Lagarde said Tuesday that Greece's reform plan is sufficient to continue giving the country aid, but that its proposal will need more detail.