In return for the loans, Greece will aim to reduce its debt to 120.5% of GDP by 2020 and accept an “enhanced and permanent” presence of EU monitors to oversee economic management.
Eurozone finance ministers agreed the bailout after late-night talks in Brussels.
The main losers in the deal are bondholders who will take losses of 53.5% on the value of their bonds.
However, this could rise to as much as 70% when all the elements of the exchange are accounted for, the BBC reports.
Greece needs the funds to avoid bankruptcy on 20 March, when maturing loans must be repaid.
After five straight years of recession, Greece’s debt currently stand at over 160% of GDP.
Announcing the deal, Jean-Claude Juncker, Prime Minister of Luxembourg and chairman of the eurozone finance ministers group, said the “far-reaching” deal would lead to “a very significant debt reduction for Greece” and ensure its future within the eurozone.
He said “the eurogroup is fully aware of the significant efforts already made by the Greek citizens”.
But he added that “further major and joint efforts by all parts of the Greek society are needed to return the economy to a sustainable growth path.”
The head of the IMF, Christine Lagarde, who also took part in the negotiations, said the deal “should give enough space for Greece to restore its competitiveness”.
