Eurozone finance ministers struck a deal early Wednesday clearing the way for Greece to access a fresh round of bailout funds, while also laying out debt relief measures aimed at securing the involvement of the International Monetary Fund (IMF).
The agreement, reached after 11 hours of talks in Brussels, should allow Greece to receive an overall 10.3 billion euros (11.6 billion dollars) in the coming months, needed to prevent the cash-strapped from returning to the brink of bankruptcy.
Athens can expect an initial disbursement of 7.5 billion euros in June, once technical work is completed and Athens is deemed to have fulfilled all conditions. Greece has to make more than 3 billion euros in debt payments in July alone.
The rest of the bailout tranche will be paid "after the summer," the Eurogroup of eurozone finance ministers agreed, on condition that Athens carries out further reforms in areas including privatization, bank governance and the energy sector.
One of the thorniest issues was the question of debt relief, sources said on condition of anonymity. The IMF, one of Greece's creditors, had insisted on the issue as a condition to remain involved. But the approach has been controversial with eurozone governments such as Germany.
Wednesday's agreement includes short, medium and long-term measures to ensure that Athens is able to repay its debt, most of which are envisaged to come into play after Greece has completed its bailout, in 2018.
The proposed measures include interest rate reductions and the extension of debt maturities, as well as the use of almost 20 billion euros in unused bailout funds to trade in existing loans against ones with longer maturities.
Based on the proposed measures, which Eurogroup chief Jeroen Dijsselbloem said could be "sized to fit" Greece's needs, IMF staff and management will now recommend to their board that it draws up a new financial package for Greece before the end of the year.
"We welcome that it's recognized that Greece needs debt relief," said Poul Thomsen, the IMF's chief economist for Europe, while noting that the board's decision would depend on a new evaluation of Greek debt sustainability.
Greek Finance Minister Euclid Tsakalotos said this was an "important moment" for his country, expressing optimism that this could be "the beginning of turning Greece's vicious circle of recession, measures, recession into one where investors have a clear runway to invest in Greece."
"This deal is first and foremost an act of confidence vis-a-vis Greece today," added French Finance Minister Michel Sapin, adding that negotiations had taken place in an "extremely relaxed" and constructive climate.
Tsakalotos, meanwhile, said there had been some "tense moments."
Athens and its creditors have spent months negotiating reforms and cost-cutting measures that would allow money to continue flowing from Greece's third, 86-billion-euro bailout.
Ahead of the meeting, the Greek Parliament passed several austerity measures including controversial pension cuts and tax hikes.