EU-IMF agrees deal to cut Greek debt by €40bn Christine Lagarde, the head of the IMF, hailed a deal that would give the green light to blocked aid payments to Greece and that would make "a substantial contribution to the sustainability of its debt." "Taken together, these measures will help to bring back Greece's debt ratio to a sustainable path and facilitate a gradual return to market financing," she said. Under the new plan, Greece is forecast to reach a debt to GDP ratio of 175pc in 2016, shrinking to 124 pc in 2020. In a decision that may return to haunt the EU and IMF, the eurozone has agreed to be responsible for a Greek debt to GDP ratio to be "substantially lower than 110pc" in 2022. "I welcome the commitment by European partners to bring back Greece's debt to substantially below 110pc of GDP by 2022, conditional on full implementation of the program by Greece," she said. This represents a major debt reduction for Greece relative to its current debt trajectory. Meeting for the third time in two weeks, eurozone finance ministers agreed to lower interest rates to Greece by 100 bps on the original €110 billion lent to the country, to extend all loan maturities by 15 years and to defer interest payments on euro bailout fund loans by 10 years. On top of that, to bring about the immediate 20pc debt reduction, the EU and IMF agreed support for an unspecified bond buy back scheme for the Greek government. "The Eurogroup was informed that Greece is considering certain debt reduction measures in the near future, which may involve public debt tender purchases of the various categories of sovereign obligations," said a statement. If this is the route chosen, any tender or exchange prices are expected to be no higher than those at the close on Friday, 23 November 2012. The ECB will also hand profits, worth up to €15bn, made on Greek bonds back to the eurozone's national central banks with the commitment that the money will be paid into a "segregated account" for Greece. Since the summer, the EU and IMF have pushed the Greek government to the brink of bankruptcy by haggling over a credible strategy to decrease Greece's debt - previously projected to be 190pc of GDP in 2015 - over the next decade. The IMF had previously set the goal of reducing Greek debt to 120pc of GDP by 2020, a target that has been knocked off track by the deeper and longer than forecast recession in Greece. Negotiations continued for 13 hours on Monday night as the IMF clashed with ministers over the Fund's call for eurozone governments to accept losses on their loans to Greece, known as "Official Sector Involvement" (OSI). The proposal was blocked by Germany, Holland and the ECB but could return as source of conflict between the EU and IMF if, as before, Greece fails to meet targets on debt reduction. Wolfgang Schaeuble, the German finance minister, hinted that government might consider write downs after 2016, when Greece is expected to reach a primary surplus of 4.5 per cent of GDP. "When Greece has achieved, or is about to achieve, a primary surplus and fulfilled all of its conditions, we will, if need be, consider further measures for the reduction of the total debt," he said.