Brussels - Eurozone finance ministers struck a new deal with the IMF early on Tuesday to slice more than €40bn off Greece's massive debt burden by 2020 - in turn freeing up long-blocked loans.
"The decision will certainly reduce the uncertainty and strengthen confidence in Europe and in Greece," said European Central Bank President Mario Draghi as he welcomed the agreement on leaving the talks.
In a key step towards restoring financing to Athens, Greece's public creditors agreed to take measures to bring down the country's debt-to-GDP ratio from an estimated 144% to 124% come 2020, European Union sources said.
The ministers then agreed to release €43.7bn after months in which Greece was starved of bailout financing.
Two sources told AFP it would be handed over "in one go".
The original, second bailout deal agreed for Greece in March was meant to see Greece's debt fall to 120% of gross domestic product by 2020.
Draghi put the seal on the deal some 12 hours after the Eurogroup of currency partners held its third late-night meeting in two weeks in a bid to unblock long-delayed loans to the Greek government and avert bankruptcy.
"Greece has delivered, now it's delivery time for the Eurogroup and the IMF," said Rehn.
There will be a mixture of techniques used to bring down Greece's debt burden.
These will involve Greece selling more short-term Treasury bills on commercial markets, a buyback by Greece of old debt that has fallen in value on commercial money markets and national central banks across the eurozone foregoing profits on holdings of Greek debt whose worth has slumped.
International Monetary Fund Managing Director Christine Lagarde said the key was to deliver a "credible solution for Greece".
The IMF has been pushing for a so-called "haircut" or write-down of debt by eurozone partner governments in the way banks wrote off most of the loans due to them earlier this year, but Germany has come out against this ahead of a general election next year.
Other Triple A-rated states, though, have said they would "not exclude" the possibility of a write-down of debt from 2015 onwards.
"Let's assume our responsibilities," said French Finance Minister Pierre Moscovici.
Paris has long been a firm backer of all efforts to keep Greece in the eurozone club.
Greece has been waiting since June for a loan instalment of €31.2bn, part of a €130bn rescue granted earlier this year.
In exchange, Athens has pledged to implement a new series of radical austerity measures to cut its annual overspending.Merkel hostile to "haircut"
Meanwhile, EU leaders and the ECB have said they cannot take losses on loans to Greece.
"For once, it would seem, Greece can take none of the blame," said Carsten Brzeski, an analyst at ING bank.
Samaras' government pushed a fresh batch of deeply unpopular cuts through parliament earlier this month.
Greece's public creditors have decided to give Greece an extra two years, until 2016, to balance the books.
Greece's private creditors have written off more than €100bn in debt, and the IMF has urged the ECB to accept this solution.
But both the central bank and Germany have so far held out, saying it would violate EU mandates against bankrolling individual countries.
German Chancellor Angela Merkel has said she is "against this debt write-off and I want to find another solution".
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