The extension will allow Greece to negotiate a follow-up arrangement with creditors.
“The Greek authorities have expressed their strong commitment to a broader and deeper structural reform process aimed at durably improving growth and employment prospects, ensuring stability and resilience of the financial sector and enhancing social fairness,” the Eurogroup said in a statement.
Dutch finance minister Jeroen Dijsselbloem, head of the Eurogroup, said that Athens had pledged to honor all its debts.
“This is a very positive outcome,” Jeroen Dijsselbloem 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,” he added.
Greece had agreed to present an initial list of reform measures by February 23, Jeroen Dijsselbloem said.
Athens welcomed the deal, which a Greek government official said gave it time to negotiate a “new deal”.
“Greece has turned a page,” the official said.
“We have avoided recessionary measures.”
Greece had been seeking a six-month extension of the bailout but the Eurogroup opted for four months.
The euro gained against the US dollar on February 20 following the announcement, adding 0.3% to $1.1403, while the Dow Jones industrial average and S&P 500 struck new intraday highs.
The agreement removes the immediate risk of Greece running out of money next month.
The new deal also provides a breathing space for the new Greek government to try to negotiate longer-term debt relief with its EU creditors.
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