Eurozone ministers back 130bn-euro bailout for Greece

Eurozone finance ministers have reached agreement on a vital second bailout for heavily indebted Greece.-The deal, which came after more than 13 hours of talks in Brussels, will provide Athens with loans worth more than 130bn euros (£110bn; $170bn). Greece needs the funds to avoid bankruptcy on 20 March, when maturing loans must be repaid.

In return, Greece will undertake to reduce its debts to 120.5% of its GDP by 2020.

After five straight years of recession, Greece's debt currently amounts to more than 160% of its Gross Domestic Product.

The euro immediately rose on reports of the deal.

Deeper cuts

The agreement was announced early on Tuesday by Jean-Claude Juncker, prime minister of Luxembourg and chairman of the eurozone finance ministers group.

Mr Juncker said the "far-reaching" deal would lead to "a very significant debt reduction for Greece" and insure its future within the eurozone.

He said "the eurogroup is fully aware of the significant efforts already made by the Greek citizens".

But he added that "further major and joint efforts by all parts of the Greek society are needed to return the economy to a sustainable growth path."

The head of the IMF, Christine Lagarde, who also took part in the negotiations, said the deal "should give enough space for Greece to restore its competitiveness".

The BBC's Stephen Evans in Brussels says the agreement will mean deeper cuts in public spending that Greece had planned to.

It also means there should be no default or any knock-on effects in the rest of the eurozone - at least for the moment, our correspondent adds.

But he adds that big questions still remain - including whether imposing medicine of this harshness will make the Greek economy stronger.

A first rescue package worth 110bn euros in 2010 was not enough to avert Greece's deepening crisis.

Elections ahead

The deal also means that private holders of Greek debt will take losses of 53.5% on the value of their bonds.

Eurozone leaders and the IMF said in October that Greek debt should be reduced to a more sustainable level of 120% of GDP by 2020.

Some members doubt Greece's commitment to its spending pledges, and Athens had to agree to an "enhanced and permanent" presence of outside monitors in Athens, overseeing the country's economic management.

Successive rounds of austerity measures, demanded by Greece's international creditors have failed to restore growth and have provoked clashes between protesters and police.

The Greek government fell last year after ex-Prime Minister George Papandreou called for a referendum on the eurozone rescue package.

He was replaced by Lucas Papademos, an unelected technocrat who is expected to lead Greece until parliamentary elections in April.

Measures passed by parliament last week set out 3.3bn euros' worth of cuts to salaries and pensions, and health and defence spending - sparking a fresh series of protests.

Greek Finance Minister Evangelis Venizelos has said he now expects the "long period of uncertainty" to end.

21 February 2012 Last updated at 05:56 GMT- BBC