Greece will receive a third bailout after marathon talks in Brussels where eurozone leaders have reached the agreement.
EU chairman Donald Tusk has announced leaders agreed “in principle” on negotiations for the bailout, “which in other words means continued support for Greece”.
Greece’s PM Alexis Tsipras said that after a “tough battle”, his country had secured a “growth package” of €35 billion, and won debt restructuring.
The country will now have to pass reforms demanded by the eurozone by July 15.
“There will not be a <<Grexit>>,” said European Commission head Jean-Claude Juncker, referring to the widespread fear that if there had been no deal, Greece would have had to leave the eurozone.
Alexis Tsipras also said he had the “belief and the hope that… the possibility of <<Grexit>> is in the past”.
“The deal is difficult but we averted the pursuit to move state assets abroad,” he said.
“We averted the plan for a financial strangulation and for the collapse of the banking system.”
Jeroen Dijsselbloem, the head of the eurozone group of finance ministers, said the agreement included a €50 billion Greece-based fund that will privatize or manage Greek assets. Out of that €50 billion, €25 billion would be used to recapitalize Greek banks, he said.
Greek banks have been closed for two weeks, with withdrawals at cash machines limited to €60 per day. The economy has been put under increasing strain, with some businesses closing and other struggling to pay suppliers.
Eurozone finance ministers are due to meet later on Monday to discuss providing “bridge financing” that would cover Greece’s short-term needs.
Parliaments in several eurozone states have to approve any new bailout.
“The road will be long, and judging by the negotiations tonight, difficult,” German Chancellor Angela Merkel said on July 13.
French President Francois Hollande said the agreement had allowed Europe to “preserve integrity and solidarity”.
“We also had to show that Europe is capable of solving a crisis that has menaced the eurozone for several years,” he said.
Eurozone leaders had been meeting in Brussels for 17 hours, with talks continuing through the night.
During the talks, reports emerged that Greece was holding out over the proposed role of the International Monetary Fund (IMF) in a new program, and over the fund to hold Greek assets.
A meeting of European finance ministers in Luxembourg ended with no agreement on Greece’s debt.
The head of the Eurogroup, Jeroen Dijsselbloem, has said that Greece needs to seize a “last opportunity” to reach a deal with its creditors.
Jeroen Dijsselbloem called on Greece to submit “credible” proposals in the coming days.
To help tackle the crisis, an emergency summit of leaders from Eurozone nations has been called for June 22.
Jeroen Dijsselbloem highlighted that “very little time remains” as Greece’s current bailout program runs out this month.
“It is still possible to find an agreement and extend the current program before the end of the month, but the ball is clearly in the Greek court to seize that last opportunity,” he said.
The Greek finance minister, Yanis Varoufakis, said his nation had presented a “comprehensive” proposal and that disagreement only existed over spending equivalent to 0.5% of Greek GDP, which he says does not constitute a “dangerous impasse”.
Yanis Varoufakis highlighted that Greece has already made a “gigantic adjustment” over the last five years and rejected any measures that would “jack-up” taxes and reduce benefits further.
He warned that negotiations were “dangerously close to a state of mind that accepts an accident”.
Greece has less than two weeks remaining to strike a deal with its creditors or face defaulting on an existing €1.6 billion loan repayment due to the IMF.
The country has already rolled a €300 million payment into those due on June 30.
If it fails to make the payment, Greece risks has to leave the eurozone and possibly also the EU.
The European Commission, the IMF and the European Central Bank (ECB) are unwilling to unlock bailout funds until Greece agrees to reforms.
They want Greece to implement a series of economic changes in areas such as pensions, VAT and on the budget surplus before releasing €7.2 billion of funds, which have been delayed since February.
Pressure was also raised on Greece today when the boss of the International Money Fund (IMF), Christine Lagarde, warned there was “no period of grace” for Greece over its impending debt repayment deadline.
Christine Lagarde said Greece would be in default on its loans from the IMF if it failed to make a €1.6 billion ($1.8 billion) payment on June 30.
Greece’s new Finance Minister Yanis Varoufakis says his government will not negotiate over the Greek bailout conditions with the “troika” team from the EU and IMF.
Yanis Varoufakis said he was rather seeking direct talks with eurozone leaders, to try to cancel more than half the money Greece owes.
The minister was speaking after meeting Jeroen Dijsselbloem, head of the Eurogroup – the eurozone finance ministers.
Jeroen Dijsselbloem said Greece should stick to its reform commitments.
He said Greece and the Eurogroup had a “mutual interest in the further recovery of the Greek economy inside the eurozone” and warned against Athens acting unilaterally in its efforts to renegotiate its bailout.
Greece has endured tough budget cuts in return for its €240 billion ($270 billion) bailout, agreed in 2010 with the “troika” – the European Commission, International Monetary Fund (IMF) and European Central Bank (ECB).
There was little warmth between the two men at the news conference, with Jeroen Dijsselbloem making a brusque exit.
Breaking with tradition, Yanis Varoufakis wore an open-neck shirt – hanging loose at his belt. Jeroen Dijsselbloem was dressed conventionally.
On the troika, Yanis Varoufakis said: “We have no intention of co-operating with a three-member committee whose goal is to implement a program whose logic we consider anti-European.”
Jeroen Dijsselbloem, who is also Dutch Finance Minister, said the two sides would decide what would happen next before the bailout program ends – that is, by February 28.
He also met Greek PM Alexis Tsipras in Athens, who led the Syriza radical left-wing coalition to victory in elections on Sunday.
Yanis Varoufakis, meanwhile, said Greece was not asking for an extension of the existing bailout, but seeking a “new agreement that will emerge following talks between all Europeans”.
He said he would he seek “maximum co-operation” with Greece’s international creditors, but that he would not work through the “troika”, which he called “a committee built on rotten foundations”.
Jeroen Dijsselbloem rejected Alexis Tsipras’s idea of convening a European conference on debt.
“This conference already exists and it’s called the Eurogroup,” he told the news conference.
Syriza won on an anti-austerity platform, promising to have half of Greece’s debt written off, and to roll back on deep cuts to jobs, pay and pensions.
Greece’s economy has shrunk drastically since the 2008 global financial crisis, and high unemployment has thrown many Greeks into poverty.
The new government has already pressed ahead with cancelling major privatization projects, including of the two main ports of Piraeus and Thessaloniki.
But EU officials have warned there is little appetite among eurozone countries for cutting the debt.
Greece has about €20 billion ($22.5 billion) to repay this year, according to the Greek finance ministry.
Economists estimate that Greece needs to raise about €4.3 billion in the first quarter.