ATHENS, Greece -- European and global financial leaders have agreed to release 44 billion euros in critical loans to Greece and provide billions in additional debt relief in order to help the country stabilize its ailing economy.
After three weeks of negotiations, Greece's euro partners and the International Monetary Fund agreed early Tuesday morning to release the loans in four installments beginning next month. The leaders also settled on a raft of measures -- including a debt buyback program and an interest rate cut on loans -- that will reduce the country's debts by about 40 billion euros.
Greek Prime Minister Antonis Samaras hailed the agreement in Brussels as a victory. "Yesterday, a very grey, a very dark time for Greece ended definitively," he said in a televised address to the nation, adding that the agreement "managed to ensure us remaining in the euro."
But the country will still face years of economic pain as austerity measures agreed to as part of the bailout package are implemented.
Most stock markets in Europe were modestly higher on the news out of Brussels with the Stoxx 50 index of leading European shares closing up 0.2 percent. Meanwhile the euro gave up earlier gains to trade 0.4 percent lower at $1.2941. The interest rate charged on Greece's benchmark 10-year bonds, an indicator of investor confidence in a country's finances, fell 0.2 percentage points to 14.47 percent on the news of the debt deal.
"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.
"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 had 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 240 billion euros in rescue loans -- of which the country has received about 150 billion euros 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 facing bankruptcy and a possible forced exit from the 17-country eurozone. This would have potentially chaotic repercussions for the world economy.
Nonetheless, the spending cuts and reforms insisted on by the troika have been painful. Ordinary Greeks are struggling to make ends meet as wages have been cut and taxes increased. The country is routinely shut down as strike after strike is called in protest of yet more austerity. Meanwhile, extreme political views on both the left and right are enjoying increased popularity.
The eurogroup and IMF agreed to release in December 34.4 billion euros in loans originally scheduled for June. The remainder will be 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, including its pharmacists which have gone for months without any payment from thhe Greek state welfare system
Greek Finance Minister Yannis Stournaras said the deal was "very important for it keeps Greece in the euro, offers it a significant opportunity to exit the vicious cycle of recession and over-indebtedness, and contributes to its debt reduction."