Eurozone finance ministers have approved a new $172-billion bailout for Greece, the second for the debt-ridden country in two years.

The financial-rescue package could reduce the Greek government debt from about 160 percent of the country’s economic output to just more than 120 percent by 2020 – the maximum debt level considered sustainable by the International Monetary Fund. It also likely averts a Greek default next month on $19 billion in financial obligations, although the country faces years of austere spending.

With its previous $145-billion bailout, Greece is now by far the biggest recipient of international aid in the 13-year history of the 17-nation bloc that uses the euro. Yet Greece accounts for just two percent of the eurozone economy.

Greek Prime Minister Lucas Papademos called the pact “historic” and said it gives his country a new opportunity to advance its economy.

“It would be not be an exaggeration to say that today is a historic day for the Greek economy. With today’s decisions, we are given an opportunity to move towards more stable conditions, to reduce the uncertainty which has affected the economic activity and enhance confidence in the prospects of the Greek economy. In this way, the adjustment process of the economy can be facilitated and also better conditions for its recovery can be provided and new jobs can be created.”

The deal was reached after 13 hours of negotiations in Brussels. Greece’s large private creditors agreed to take on a bigger-than-expected 53.5-percent face-value loss on their bonds. More than $141 billion of Greece’s debt will be erased.

In addition, because the country’s payments will be stretched out for years, the financial institutions will lose about three-quarters of their original investment in the Mediterranean country.

Even so, the lead negotiator for the banks, Charles Dallara of the Institute of International Finance, praised the agreement.

“This is an unprecedented level of voluntary debt reduction, upwards of 100 billion euro. We are stretching out maturities so that the cumulative impact of both the debt reduction and the new terms and conditions is such to remove from the next 8 years over 150 billion euro of maturities coming due. We have extended these new terms after debt reduction on highly concessional interest rates. All of this is a recognition of the fact that Greece is experiencing extraordinarily challenging times.”

Eurozone chief Jean-Claude Juncker says the bailout will preserve the financial stability of both Greece and the eurozone. But he warned Athens must meet a series of conditions to secure the full bailout.

“The eurogroup is fully aware of the significant efforts already made by the Greek citizens, but also underlines 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 Greek government has already adopted deeply unpopular austerity measures that include a 22-percent cut in the country’s minimum wage and the elimination of 15,000 government jobs.

But donor countries who are skeptical of Greece’s ability to enact further austerity measures to pay back their debts insisted that the new bailout deal contain a special account that sets aside some of the rescue funds specifically to cover interest payments on Greece’s massive debt.