Heard on the Street

Thank Greece It’s Friday

Greece’s agreed extension with the eurozone tees up more drama in the months ahead

By Richard Barley

Feb. 20, 2015 5:37 p.m. ET

Greece and the eurozone agreed to extend the nation’s bailout. Further tests are to come. Greece and the eurozone agreed to extend the nation’s bailout. Further tests are to come. Photo: Associated Press

Mark your diaries. Greece and the eurozone agreed Friday to a four-month extension to the country’s current financing package. In reality, there are further tests to come.

The first notable date arrives very quickly. Monday marks the deadline for the Greek government to submit a list of reforms that will be reviewed by the International Monetary Fund and European Commission to see if they form a basis for proceeding. Only after that would national parliaments, where necessary, move to approve the extension. In other words, Greece doesn’t have an extension yet and it won’t see any financing for some time.

Eurozone finance ministers had previously said it wasn’t clear what Greece wanted to do. Monday should finally bring some welcome clarity.

Greek Finance Minister Yanis Varoufakis claimed this as a victory, with Greece responsible for designing its own reforms. And he has won some flexibility on this year’s primary budget surplus target, which will now be set to “take account of” the economic situation. But Mr. Varoufakis also said that if reforms were rejected, the deal was “dead.”

The second date to watch is the end of April, which marks the deadline for these reforms to be set out in detail. That might then allow for Greece to receive delayed disbursements from its existing financing agreement.

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