After a day of marathon talks that ran into Monday night, European finance ministers reached a deal that will allow Greece to receive more financial aid and temporarily stave off the chance of economic collapse. The nation's creditors agreed to lower interest rates on Greek loans, push payments back for several years on some, and give up on some of the profits from Greek bonds held by the European Central Bank. The International Monetary Fund also agreed to ease up on targets for the Greek deficit, setting a new goal of reducing the deficit to 124 percent of GDP by 2020. In exchange, the country will get 43.7 billion euros in new lending, which should keep the country solvent until the end of 2014.
Economic observers are cautiously optimistic that the deal will pull the country and the euro zone out of crisis mode, though Greece is still a long, long way away from being "fixed." The deficit is currently 170 percent of GDP and unemployment is a crippling 25 percent. Almost three-quarters of its debt is now owned by the ECB and there is not much left for the government to cut in order to reduce spending. The other euro zone countries seem committed to keeping Greece in their financial union, but those who do own Greek debt are likely to lose quite a bit of money on it, and cash alone will not solve the nation's larger economic problems. Its whole economy is broken, and while this deal will be an important and necessary lifeline, it's only the head that remains above water for now. 2014 is a long way away.