Greece received a 14.5 billion euro ($18 billion) loan from the European Union on Tuesday and can now repay its immediate debt, but still faces a mammoth task to claw its way out of recession.
Concerns that other EU countries such as Portugal and Spain could follow Greece and need aid from the bloc have hit the euro, while investors are still watching Athens to see whether its austerity plan will stave off the risk of default.
The EU and IMF agreed at the beginning of the month to lend Greece 110 billion euros ($137 billion) over three years to help it pay billions in expiring debt after being shut out of financial markets by the high cost of borrowing.
With 5.5 billion euros already delivered by the IMF, Greece has now received the first 20-billion euro tranche of the loans, the Greek Finance Ministry said in a statement.
Athens now can and will repay an 8.5 billion 10-year euro bond which matures on Wednesday, a government official said.
Greece no longer has the liquidity anxiety, it will not need to go to markets to borrow to pay salaries and pensions, EFG Eurobank economist Gikas Hardouvelis told Reuters.
Greece will be paying interest of around 5 percent, well below current market yields of well over 7 percent for Greece's 3-year bonds.
Though it has gained a breathing space, Greece must now convince markets it can rein in its deficits so that it can eventually start borrowing again.
The programme has been designed so that Greece is able to stay away from the financial markets through the end of 2011 and the first quarter of 2012. We don't expect that to be the case, we want to come back to markets much sooner, Finance Minister George Papaconstantinou said in Brussels.
NO MAGIC WAND
Socialist Prime Minister George Papandreou's government has already implemented sizeable public sector wage cuts and raised taxes in return for the EU/IMF bailout.
In response, large and sometimes violent protests have swept the Greek capital, and a general strike and another mass demonstration have been called for Thursday.
But the government still has more painful measures in the pipeline such as pension reform, and cuts in spending and red tape to boost competitiveness.
Investors are closely watching whether Greeks will swallow the bitter austerity pill, or whether the wave of public anger continues to rise, and if it does, how well Papandreou stands up to the pressure to transform the consumer-driven economy.
Greece's main labor unions, representing some 2.5 million workers, or half the Greek workforce, said on Tuesday they will carry out more strikes in June if the government's pension bill raising retirement age is not changed.
The government hasn't realized yet the size of the explosion, said Ilias Iliopoulos, general-secretary of public sector union ADEDY.
Greece aims to cut its deficit from nearly 14 percent of GDP to 3 percent by 2014, a task the like of which almost no government has achieved before. An economy deep in recession, with GDP projected to contract by 4 percent this year, makes the job even harder.
There is no magic wand, no other way out but for Greece to deliver on the spending and revenue front and not miss targets, while also making headway in improving the economy's competitiveness, said an economist who declined to be named.
The numbers are merciless.
(Additional reporting by Renee Maltezou; writing by Jon Hemming; editing by Stephen Nisbet)