Eurozone finance ministers to allow Greece to cut its debt

City A.M. Reporter
EUROZONE finance ministers and the International Monetary Fund clinched agreement on a new debt target for Greece last night in a breakthrough towards releasing an urgently needed tranche of loans to the near-bankrupt economy, officials said.

After nearly 10 hours of talks at their third meeting on the issue in as many weeks, Greece’s international lenders agreed to reduce Greek debt by €40bn, cutting it to 124 per cent of gross domestic product by 2020, via a package of steps.

They also agreed that the interest rate on bilateral loans to Greece would be reduced by 100 basis points to 50 basis points above the cost of financing once Athens has reached a primary surplus of 4.5 per cent of GDP, a source familiar with the talks said.

The deal should open the way for a major aid instalment needed to recapitalise Greece's teetering banks and enable the government to pay wages, pensions and suppliers in December.

Greece could receive up to €44bn, although it remains unclear if the full amount will be paid in one go.

Greek finance minister Yannis Stournaras said earlier that Athens fulfilled its part of the deal through tough austerity measures, now lenders needed to do their part.