BRUSSELS, Belgium (AFP) — Eurozone finance ministers on Tuesday backed new reforms proposed by Greece in exchange for a four-month financial lifeline that will keep the country afloat and in the single currency for now.

The International Monetary Fund, however, as well as the European Central Bank, expressed reservations about the plans, despite them being an apparent climbdown for Greece’s new hard-left Prime Minister Alexis Tsipras.

The 19 eurozone ministers signed off in a telephone conference on the plans, which the new left wing Government in Athens submitted on Monday to meet a demand made by Greece’s creditors at last-gasp talks last week. Several parliaments, including Germany’s, must now approve the extension before the current bailout expires on Saturday, while key details have to be hammered out in coming weeks.

“We avoided a crisis but there are many challenges ahead,” EU Economic Affairs Commissioner Pierre Moscovici said

Greece’s finance ministry said it had “won a few weeks” breathing space to put forward new alternatives to its loathed current bailout programme.

Athens stocks closed up 9.81 per cent amid growing confidence about the agreement, which follows weeks of often bad-tempered meetings in Brussels and around the continent.

IMF chief Christine Lagarde meanwhile cautioned that the Greek list of proposals “is not conveying clear assurances that the Government intends to undertake the reforms envisaged”.

Greece has had to be bailed out twice — in 2010 and 2012 — to the tune of 240 billion euros, leaving the country with debt worth a massive 175 per cent of annual economic output.

‘Valid starting point’

Tsipras, whose Syriza party won elections in January, has demanded an end to the bailout programme and the reduction of the harsh austerity measures imposed by Greece’s main creditors — the European Union, ECB and IMF.

The eurozone ministers said in a statement after their hour-long phone call on Tuesday that those three institutions believed Greece’s new plans were “sufficiently comprehensive to be a valid starting point” for further negotiations.

“We therefore agreed to proceed with the national procedures, with a view to reaching the final decision on the extension by up to four months,” they said.

If the deal is now backed by the eurozone parliaments, all the parties will then have to sit down to the plans and hammer out a full agreement by the end of April, so Athens can meet debt payments falling due through June.

German Chancellor Angela Merkel — the “austerity queen” at the head of Europe’s biggest economy — asked her conservative party at a meeting Tuesday to back the extension when the lower house votes on Friday, a lawmaker said.

But she stressed that the “task is by no means done”, the MP said.

French President Francois Hollande hailed it as a “good compromise”. Spanish finance minister Luis de Guindos — whose government faces a major challenge from left-wing parties — said it was a “positive solution.”

‘Just a stop gap’

The reform list unveiled by Athens includes steps to tighten up on tax collection and government spending, especially on the civil service and pensions, and crack down on corruption. But it keeps measures to offset the pain caused by the tough austerity policies Athens agreed to in the bailout programme, such as free electricity for 300,000 poor families, free access to health care, food and public transport coupons and aid for those on low pensions.

No sooner had the eurozone ministers announced the deal than reservations began to emerge.

ECB head Mario Draghi said some of the Greek reform plans “differ” from existing programmes, and that any new steps must be of “equal or better quality” in cutting Greece’s debt.

Diplomatic sources in Brussels said many had reservations about the accord but all recognised it was better to have an initial agreement to avoid the dangerous uncertainties a failure would have caused. But Europe has in many ways just put off the challenge of dealing with Greece’s long-term debt, analysts said.

“This deal is just a stop-gap and nothing has yet been done to tackle Greece’s unsustainable debt position,” Jennifer McKeown of Capital Economics said. “A disorderly default and euro exit remains a distinct possibility in future.”