For the first time, private lenders, including banks, are also pledging support which will give Greece easier repayment terms.

The deal, struck at an emergency summit of the Eurozone's 17 member countries, also involves support from the International Monetary Fund (IMF).

Banks and other private investors will contribute EUR37bn to the package.

The Greek Prime Minister, George Papandreou, welcomed the deal: "We now have a programme and a package of decisions which create... a sustainable debt management for Greece.

"And this in the end of course will mean not only the funding of a programme but it will also mean the lightening of the burden on the Greek people."

French President Nicolas Sarkozy said private lenders will contribute a total of EUR135bn over 30 years to Greece.

The involvement of commercial lenders in providing assistance to Greece had been one of the thorniest issues under discussion.

France and the European Central Bank (ECB) were against it, fearing it could spark a Europe-wide banking crisis, push Spain and possibly Italy into trouble, and even jeopardise the solvency of the ECB itself.

Germany though insisted on the private sector bearing some of the pain, or, in the jargon "taking a haircut".

One sticking point against roping in non-government lenders was that any move to allow the country easier repayment terms would be viewed by credit rating agencies as a tacit admittance that it was unable to sustain its borrowings - something that would put it into "partial default".

But the eurozone will back up any new Greek bonds issued to the banks with guarantees if the deal is seen as a "selective default" by rating agencies.