Greece is no longer facing imminent bankruptcy after eurozone finance ministers finally approved a 130-billion euro bailout.
This round of negotiations has dragged on, but after 13 hours of talks, a deal was eventually struck.
European Monetary Affairs Commisioner Olli Rehn agreed the discussions were gruelling, saying afterwards: “In the past two years and again this night, I’ve learnt that marathon is indeed a Greek word. But in the end we came to an agreement.”
A 14.5 billion euro bond repayment due from Greece on March 20 will also be restructured.
“We begin the day today at debt to GDP ratio at 120.5 per cent. So significant progess has been made overnight that will put Greece in a better position to address a very ambitious programme that it has negotiated over the last few weeks,” said a positive Christine Lagarde, head of the International Monetary Fund.
A bond swap with banks and insurers will allow 100 billion euros worth of debt to be written off.
Greek Prime Minister Lucas Papademos said: “We’re very happy with the outcome in regard to both the programme and the Private Sector Initiative that pave the way for the next steps that will make possible the official financial suppport to Greece.”
To get the rescue package, Athens has committed to deeper cuts, which are unlikely to revive an already beleaguered economy.
Harsher austerity will be hard to sell to the Greek people, some of whom are already protesting almost on a daily basis. The coalition government could be punished at the ballot box if planned elections do take place in April.