BRUSSELS - After more than 12 hours of talks, the countries that use to euro reached an agreement early Tuesday to hand Greece 130 billion euro ($170 billion) in extra bailout loans to save it from a potentially disastrous default next month, an European Union diplomat said.
The euro surged as the news broke, climbing 0.7 percent to $1.328 within minutes. While much depended on the details of the deal, a final agreement on the bailout for Greece will take some pressure off the 17-country currency union, which has been battling a serious debt crisis for two years.
The deal - details of which were still being worked out by European finance ministers in an all-night session in Brussels - was expected to bring Greece's debt down to 120.5 percent of gross domestic product by 2020, according to the official. That's around the maximum that the International Monetary Fund and the eurozone considered sustainable.
The diplomat spoke on condition of anonymity because a formal announcement was pending.
The country needs the 130 billion euro ($170 billion) bailout so it can move ahead with a related 100 billion euro ($130 billion) debt relief deal with private investors. That deal needs to be in place quickly if Athens is to avoid a disorderly default on a bond repayment on March 20.
Last week, a new report from Greece's debt inspectors indicated that the country's debt would still be close to 129 percent of GDP by the end of the decade, despite massive new spending cuts planned by Athens and a tentative 100 billion euro debt relief deal with private investors.
That level would have prevented the IMF and some euro countries from putting up more rescue money - on top of a 110 billion euro bailout Greece received in 2010.
Moving in and out of talks with bondholder representatives and consultations among themselves, the IMF and the European Central Bank, the ministers pushed private investors to accept steeper losses, going beyond a 50 percent cut in the face value of their bonds.
It was unclear what the final deal with bondholder representatives looked like, but the lower debt level suggested that they compromised further. The big question will now be how many banks and other investment funds will actually agree to participated voluntarily and whether Greece will have to force some holdouts to sign up to make the deal effective.