Until then, Greece, beset by 25% unemployment and a shrinking economy, won`t receive the next installment of its 240 billion euro ($273 billion) rescue package.
Still, U.S. investors like the news: The Dow Jones industrial average closed up 154.67 at an all-time high of 18,40.44.
Greece`s new government swept into office recently on pledges to roll back tax hikes, budget cuts and other reforms that have walloped its fragile economy. But eurozone creditors such as Germany have resisted efforts to ease the overhaul, which Greece agreed to implement as a condition of the bailout.
Under the pact reached Friday, Greece will propose modified reform measures Monday and the European Central Bank, European Commission and International Monetary Fund will say within days whether they provide "a valid starting point" for negotiations. A final agreement is expected to be reached by the end of April, according to a statement of the Council of the European Union.
GREECE DEBT DEAL: Statement from the EU
"It sounds like they`re just kicking the can down the road," says Wells Fargo global economist Jay Bryson. Still, he says he thinks the two sides can come to terms on a less onerous package of reforms.
In a note to clients, Barclays Capital wrote that Friday`s deal "removes a significant uncertainty from the euro area and global outlook."
But it added that "the acrimony of the negotiations" raises doubts about efforts to further integrate eurozone economies and suggests European elections in coming months could revive battles over economic reforms.
The Council of the European Union, in announcing the deal, said, it appreciates the "remarkable adjustment efforts undertaken by Greece and the Greek people over the last years" for solving the crushing debt problem.
Still, Greece faces a systematic overhaul of its government.
"The authorities commit to implementing long-overdue reforms to tackle corruption and tax evasion, and improving the efficiency of the public sector," the EU statement said of Greek officials.