By Nick Mann | 27 November 2012

Eurozone finance ministers have agreed a €43.7bn bailout of the Greek economy and steps to help the country significantly reduce its debt over the next decade.

At the end of an overnight meeting in Brussels, the finance ministers said they were ‘confident’ that the deal would put Greece’s debt ‘on a sustainable path’. Measures include cutting the interest rate on earlier loans made to the country and helping it to buy back its own bonds from private investors

Greece’s debt is forecast to reach 189% of gross domestic product next year, but it will now be expected to reduce this to 175% by 2016, to 124% by 2020 and to ‘substantially lower’ than 110% by 2022.

Reducing Greece’s debt will also facilitate its return to the international bond markets so it can raise finance itself, the finance ministers, known as the Eurogroup, said in a statement.

‘We are committed to providing adequate support to Greece during the life of the programme and beyond until it has regained market access, provided that it fully complies with the requirements and objectives of the adjustment programme,’ they explained.

Under the adjustment programme, Greece has had to commit to a host of austerity measures, most recently a €13.5bn package of spending cuts, tax rises and labour reforms and its 2013 budget.

The Eurogroup statement ‘commended’ the Greek authorities ‘for their demonstrated strong commitment to the adjustment programme and reiterated its appreciation for the efforts made by the Greek citizens’.

Greece will use the bailout funds to recapitalise its banks and keep its public sector afloat.

The Eurogroup expects to formally approve the bailout by December 13, following domestic approval by the eurozone countries involved.

Over three-quarters of the bailout will be paid out in December. The remainder will be allocated in three ‘sub-tranches’ during the first quarter of 2013, as Greece carries out agreed austerity measures such as tax reforms.

Christine Lagarde, the managing director of the International Monetary Fund, welcomed the agreement, which she said would further support Greece’s economic reform programme and make a ‘substantial contribution’ to the sustainability of its debt.

‘This builds on the significant efforts by the Greek government to carry forward its fiscal and structural reform programme,’ she added.