Greece's finance minister Evangelos Venizelos, left, and Greece's prime minister Lucas Papademos hold a joint news conference after a Eurogroup meeting in Brussels, February 21 2012.
Greece's finance minister Evangelos Venizelos, Greece's prime minister Lucas Papademos and Germany's finance minister Wolfgang Schaeuble
Greece's finance minister Evangelos Venizelos, left, and European Central Bank President Mario Draghi
Euro zone finance ministers agreed at a marathon meeting to a 130 billion euro bailout for Greece, after more than 13 hours of tense negotiations in Brussels, according to media reports and statements by European officials.
The the bailout will reduce Greece's government debt from about 160 per cent of the country's gross domestic product to 120.5 per cent by 2020, meeting a key benchmark target set by the European Union and the International Monetary Fund.
Greece needs the funds to avoid bankruptcy on March 20 2012, when maturing loans must be repaid, the BBC said.
The Eurogroup said in a statement that it welcomes the agreement reached with the Greek government on a policy package that constitutes the basis for the successor programme.
"We also welcome the approval of the policy package by the Greek parliament, the identification of additional structural expenditure reductions of 325 million euro to close the fiscal gap in 2012 and the provision of assurances by the leaders of the two coalition parties regarding the implementation of the programme beyond the forthcoming general elections," the Eurogroup statement said.
"This new programme provides a comprehensive blueprint for putting the public finances and the economy of Greece back on a sustainable footing and hence for safeguarding financial stability in Greece and in the euro area as a whole."
The Eurogroup said that it was "fully aware" of the significant efforts already made by Greek citizens but also underlined that further major efforts by Greek society are needed to return the economy to a sustainable growth path.
The group called on the European Commission to significantly strengthen its Task Force for Greece, in particular through an enhanced and permanent presence on the ground in Greece, in order to bolster its capacity to provide and co-ordinate technical assistance.
Euro area member states stand ready to provide experts to be integrated into the Task Force, the statement by the 17-member group said.
International Monetary Fund chief Christine Lagarde welcomed the agreement by the Eurogroup.
"The combination of ambitious and broad policy efforts by Greece, and substantial and long-term financial contributions by the official and private sectors, will create the space needed to secure improvements in debt sustainability and competitiveness," Lagarde said.
"These actions, together with a significant strengthening of the financial sector, will pave the way for a gradual resumption of economic growth," she said.
"The success of this strategy crucially depends on full and timely policy implementation by Greece and long-term support by euro area member states. Recognising the sacrifice involved for the Greek people, the strategy will also aim to minimise the impact on the poorest and most vulnerable.
"As soon as the prior actions agreed with the Greek authorities are implemented and adequate financial contribution from the private sector is secured, I intend to make a recommendation to our Executive Board regarding IMF financing to support a programme," she said.
"I also welcome today's discussion on ensuring the adequacy of the European Financial Stability Facility (EFSF) and European Stability Mechanism (ESM), which will help bolster the firewall against financial contagion, catalyse efforts to enhance IMF resources, and help secure global stability for the benefit of all," Lagarde said.
The euro jumped nearly one US cent after the deal was announced.