Eurozone finance ministers have approved a 130bn euro ($170bn) second bailout package for Greece to resolve the debt-ridden nation's immediate repayment needs.
The deal reached after 13 hours of tortuous talks in Brussels, however, is unlikely to revive Greece's ailing economy.
Al Jazeera's John Psaropoulos, reporting from Greece, said: "The deal involves offering Greece a package of $170bn as originally envisaged in a bailout loan."
The deal will bring government debt in Athens down to "120.5 per cent" of gross domestic product (GDP) by 2020, a eurozone governmental source told the AFP news agency.
"We're very happy," Lucas Papademos, the Greek prime minister, said after the accord was sealed on Tuesday.
Papademos, a former European Central Bank No. 2 backed by European Union partners to lead an emergency coalition government in Athens, acknowledged that full delivery of the deal depends on Greece delivering on a string of conditions in "a timely and effective manner".
Analysts say the deal may only delay a deeper default by a few months. Greece has been in recession for the last five years and it is unlikely to do well in the next one decade with huge spending cuts.
The accord will enable Greece to launch a bond swap with private investors to help reduce and restructure Athens' vast debts, put it on a more stable financial footing and keep it inside the 17-country eurozone.
Greece will have around 100 billion euros of debt written off as banks and insurers will swap bonds they hold for
longer-dated securities that pay a lower coupon.
Private sector holders of Greek debt are expected to take losses of 53.5 per cent or more on the nominal value of their bonds as part of a debt exchange.
Previously they had agreed to take a 50 per cent nominal writedown, which equated to around a 70 per cent loss on the net present value of the bonds.
The euro jumped almost half a cent, reversing earlier losses, after the deal was struck.
Pressure on Greece
The private creditor bond exchange is expected to be launched on March 8 and completed three days later. That means a 14.5-billion-euro bond repayment due on March 20 would be restructured, allowing Greece to avoid default.
The vast majority of the funds in the 130-billion-euro programme will be used to finance the bond swap and ensure Greece's banking system remains stable: 30 billion euros will go to "sweeteners" to get the private sector to sign up to the swap, 23 billion will go to recapitalise Greek banks.
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A further 35 billion will allow Greece to finance the buying back of the bonds, and 5.7 billion will go to paying off the interest accrued on the bonds being traded in. Next to nothing will go directly to help the Greek economy.
Jan Kees de Jager, the Dutch finance minister who is the most outspoken of Greece's northern creditors, insisted in Brussels on Monday that the Netherlands could not approve the rescue package until Greece had met all its obligations.
Finland, another stern creditor, signed a side deal with Greece for Greek banks to provide collateral in cash and highly rated assets in return for Finnish loan guarantees, removing one long-running obstacle.
Massive austerity cuts demanded by Greece's international creditors have failed to restore growth and have provoked clashes between protesters and police.
Measures passed by the Greek 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.
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 Papademos, an unelected technocrat who is expected to lead Greece until parliamentary elections in April.
Source: Al Jazeera and agencies