Greece bailout deal reached, diplomat says

BRUSSELS -- Eurozone finance ministers Tuesday sealed a second bailout for debt-laden Greece that will resolve its immediate financing needs but seems unlikely to revive the nation's shattered economy.

After a marathon 13 hours of talks, Eurozone officials said ministers had nailed measures to cut Greece's debt to around 121 percent of gross domestic product by 2020, close to their original target of 120, after negotiators for private bondholders offered to accept a bigger loss to help plug the funding gap.

Agreement on a $170 billion rescue package with strict conditions attached will help draw a line under months of uncertainty that has shaken the currency bloc, and avert an imminent Greek bankruptcy.

The euro jumped almost half a cent, reversing earlier losses, after Reuters reported a deal had been struck.

A report prepared for ministers by EU, European Central Bank and IMF experts, obtained exclusively by Reuters, said Greece would need extra relief to cut its debts near to the official debt target 2020 given the ever-worsening state of its economy.

If Athens did not follow through on economic reforms and savings, its debt could hit 160 percent by that date.

"Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it," the nine-page confidential report said, highlighting the fact that Greece's problems are far from over.

The accord will enable Athens to launch a bond swap with private investors to help reduce and restructure its vast debts, put it on a more stable financial footing and keep it inside the 17-country Eurozone.

About $130 billion of debt will be written off as banks and insurers 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 percent or more on the nominal value of their bonds. Previously they had agreed to a 50 percent nominal writedown, which equated to around a 70 percent loss on the net present value of the bonds.

The debt sustainability report delivered to ministers last week showed that without further measures Greek debt would only fall to 129 percent by 2020.