Greece clears key hurdle to extend bailout but doubts remain

Greece cleared a major hurdle Tuesday in its ongoing battle to remain solvent as its European creditors approved a 4-month extension to its financial bailout — but the cash-strapped country has much more to do to convince its partners that it deserves longer-term help beyond the summer. The country’s creditors in the 19-country eurozone endorsed Greece’s request for the extension after the European Commission, European Central Bank and International Monetary Fund — the main institutions handling Greece’s loans — provisionally backed a list of reforms that Athens proposed in a letter late Monday. Greece had to draw up the list, which includes measures to combat tax evasion and corruption, to get the bailout extended.

Creditors will be skeptical. These are notoriously difficult reforms and, in the case of the latter, usually cost money.

Megan Greene, chief economist at Manulife Asset Management.

Still, the Greek government still has a lot to do to convince its creditors that it can deliver substantive change. Eurogroup president Jeroen Dijsselbloem urged Greece to move quickly, pointing out that the reform program needs to be updated and implemented within four months. The IMF appeared the most pessimistic, insisting that the vague reform promises needed to be turned into real action. In a letter, IMF managing director Christine Lagarde said that in many key areas, the list “is not conveying clear assurances that the government intends to undertake the reforms envisaged.”

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