After weeks of tension and uncertainty, Greece and its lenders reached a temporary deal late Feb. 20. The agreement was carefully crafted to make both Athens and the reluctant governments of Northern Europe happy, but it comes at the price of postponing a resolution of the crucial issues. As a result, a "Grexit" from the eurozone will be deferred in the immediate term, but the crisis is far from over.
Greece and the Eurogroup agreed to extend Athens' bailout program for four months. The agreement keeps Greece under the protective umbrella of the European Central Bank, the European Union and the International Monetary Fund. The ECB will continue to provide liquidity for Greek banks, while the European Union and the IMF will make funds available should Greece need them.
However, this deal has left many questions unanswered. First, Greece promised to present a list of economic reforms — probably focused on cracking down on tax evasion and corruption and reforming Greece's public administration — by Feb. 23. This list will be further detailed and then agreed upon with the European Union and the IMF by the end of April. In order for Greece to receive the next tranche of the bailout, the European Union and the IMF will have to accept these proposals. (This is probably the part of the deal that made the agreement acceptable for Germany.) Still, the key source of conflict between Athens and Berlin — the specific reforms that Greece will apply in exchange for the bailout money — has only been postponed.
Second, the size of Greece's primary surplus was also omitted in the agreement. The European Union and the IMF promised Greece to take its economic situation into account when setting a deficit target, a small victory for Athens. This issue will also become problematic again in April, when Athens is supposed to present the exact details of what it plans to do.
In the coming days, Greek Prime Minister Alexis Tsipras will have to sell the deal to the most radical members of his left-wing Coalition of the Radical Left, or Syriza, and to his coalition partners from the populist Independent Greeks party. Syriza campaigned on a promise to end the bailout program and end reviews by the troika (now known as "the institutions"). In recent hours, Athens backed down on both proposals. Tsipras could face pressure from Greek voters, but the main threat to the stability of his government will come from within. If Tsipras' party significantly challenges him, he could decide not to propose significant spending cuts by April, leading to renewed conflict with Germany and the rest of the eurozone.