The Telegraph reports that Greece is set to lead the eurozone's first-ever default as European leaders agreed that the private holders of Greek debt will take a hit of €50bn over three years.
Greece will also receive another bailout package – from Europe, the International Monetary Fund and the private sector – worth €159bn.
The second bail-out follows €110bn rescue funds agreed in May and will cut Greece's debt by a quarter.
The Financial Times said the deal was a political victory for Angela Merkel, Germany's chancellor.
It notes that the agreement "includes a commitment from Europe's leaders to support Athens until it is able to return to the financial markets – a potentially unlimited guarantee that could see European taxpayers fund Greece for years."
The three-year programme means that €37bn bondholder commitments will either swap or rollover their debt for new bonds that mature in 30 years.
According to The Guardian EU leaders have also turned the eurozone's 15-month-old bailout fund into a much more ambitious instrument "resembling an infant European monetary fund".
The European Financial Stability Facility (EFSF), has been given unprecendented powers of intervention and fundraising.
Blogger Shaun Richards, Mindful Money's resident economist gives his take on the EFSF.
The Guardian notes: "It will be able to intervene on the secondary markets to buy up the bonds of struggling debtor countries, to take preemptive or "precautionary" action to nip a debt crisis in the bud by, for example, agreeing lines of credit, and to supply loans to struggling eurozone countries who would use the money to shore up and recapitalise their banks.
Such aid would apply, unlike at present, to countries not already in bailout programmes."
The eurozone loans would be provided at interest rates of 3.5%, two points lower than currently, while the maturity of loans to Greece would be more than doubled to at least 15 years and possibly to 30.
There was also good news for Ireland and Portugal, whose borrowing costs for their eurozone bailouts would also fall to 3.5%.
Greece: Austerity plan goes through
More on the Greek debt crisis.
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