Euro zone finance ministers and the International Monetary Fund clinched agreement on reducing Greece's debt on Monday in a breakthrough to release urgently needed loans to keep the near-bankrupt economy afloat.
After 12 hours of talks at their third meeting in as many weeks, Greece's international lenders agreed on a package of measures to reduce Greek debt by 40 billion euros, cutting it to 124% of gross domestic product by 2020.
In a significant new pledge, ministers committed to taking further steps to lower Greece's debt to significantly below 110 percent in 2022 -- the most explicit recognition so far that some write-off of loans may be necessary from 2016, the point when Greece is forecast to reach a primary budget surplus.
To reduce the debt pile, they agreed to cut the interest rate on official loans, extend their maturity by 15 years to 30 years, and grant Athens a 10-year interest repayment deferral.
When Greece has achieved, or is about to achieve, a primary surplus and fulfilled all of its conditions, we will, if need be, consider further measures for the reduction of the total debt, German Finance Minister Wolfgang Schaeuble said.
Eurogroup Chairman Jean-Claude Juncker said ministers would formally approve the release of a major aid instalment needed to recapitalise Greece's teetering banks and enable the government to pay wages, pensions and suppliers on Dec. 13.
Greece will receive up to 43.7 billion euros in stages as it fulfils the conditions. The December instalment will comprise 23.8 billion for banks and 10.6 billion in budget assistance.
The IMF's share, less than a third of the total, will only be paid out once a buy-back of Greek debt has occurred in the coming weeks, but IMF Managing Director Christine Lagarde said the Fund had no intention of pulling out of the programme.