World Economy

Greece Deal, First Step on Road Back to Austerity

Greece Deal, First Step  on Road Back to AusterityGreece Deal, First Step  on Road Back to Austerity

Greece and eurozone nations have agreed to a deal to extend financial aid after bailout talks in Brussels. Eurozone finance ministers reached an agreement to extend Greece's financial rescue program by four months.

Dutch Finance Minister Jeroen Dijsselbloem, head of the Eurogroup, said that Athens had pledged to honor all its debts, BBC reported Saturday.

"This is a very positive outcome," he told a news conference on Friday night. "I think tonight was a first step in this process of rebuilding trust. As you know trust leaves quicker than it comes. Tonight was a very important, I think, step in that process," Dijsselbloem said.

In return for the extension, Greece has agreed to present an initial list of reform measures by Monday, he added.

Yanis Varoufakis, the Greek finance minister, said he would work night and day between now and Monday to devise the new list. He said, ''We genuinely and faithfully targeted one objective, and that was the interests of the average European."

Eurozone officials will then review the reforms and see if they go far enough to appease creditors.

If finance chiefs are left unsatisfied, there is still a chance the deal will be scrapped. Varoufakis added that Greece had not used threats or bluff during the talks: "The four-month period will be a time to rebuild new relations with Europe and the IMF."

However, he said the deal would be "dead" if the list of Greek reforms was not agreed, reported the AFP news agency.

Friday's extension was sealed just days before Greece's bailout program ends.

Investors Eager

Economic growth and interest rates will regain the spotlight next week as investors can most likely put Greece behind for a few months.

"Now the market can begin to concentrate on stimulus beginning next month in the eurozone," said Peter Cardillo, chief market economist at Rockwell Global Capital.

Investors will also focus on the US Federal Reserve as the central bank's chair, Janet Yellen, is expected to testify before both houses of Congress on Tuesday and Wednesday.

Federal Open Market Committee members "really want to start the normalization process but they don't want markets to plunge," said Bob Baur, chief global economist for Principal Global Investors.

Fed minutes from the January meeting released this past Wednesday showed a more dovish central bank than analysts expected.

However, underlying strength in US economic data still gives many market watchers the expectation that an interest rate hike will come as early as this summer.

Bill Stone, chief investment strategist at PNC Wealth Management, said he still sees a rate hike in July, based on good economic data. "I think the minutes reflect that they are open-minded to change if things weaken considerably," Stone said.