Greece has taken a critical step toward staving off bankruptcy by securing support from its debt holders to accept massive losses on their holdings of Greek debt.
Under the agreement, investors will take a total loss of more than 50 percent on their investments, in exchange for new bonds with more favorable repayment terms.
If the bond swap had failed, Greece would have faced defaulting on its debt in two weeks, when it faced a deadline for a large return of capital to investors, known as a bond redemption.
Winning backing for the swap also paved the way for a second massive package of rescue loans from the European Union and International Monetary Fund (IMF).
The Greek Finance Ministry said on March 9 that holders of 85.8 percent of debt issued under Greek law had now agreed to a debt swap.
Greece also said it had extended the deadline for holders of bonds governed by foreign laws, of whom 69 percent have so far signed up, until March 23.
Welcoming the deal, Finance Minister Evangelos Venizelos told parliament that Greece had "already been relieved of a 105 billion-euro debt, 50 percent of GDP. This day is truly historical, for the parliament, for the people, for the Greek economy."
EU Economic And Monetary Affairs Commissioner Olli Rehn said he was "very satisfied" with the outcome of the bond swap.
IMF chief Christine Lagarde said she believed the "real risk of a crisis, of an acute crisis" in the eurozone has, for the moment, been removed because of the deal.
The deal was also welcomed by German Foreign Minister Guido Westerwelle, who said: "There is no reason for the all-clear just yet. But now there is a good reason for optimism.
"It shows that things are progressing in Greece. It shows that Europe is capable of action in a practical test. And it shows that the majority of people show a high level of rationality and readiness for constructive cooperation to overcome the debt crisis."
Greek Credit Rating Hit
After the announcement, the countries of the eurozone cleared 35.5 billion euros ($47 billion) out of the second, 130 billion-euro ($170 billion) bailout package to fund the debt swap.
Speaking after a conference call of eurozone finance ministers, Luxembourg's Prime Minister Jean-Claude Juncker said the conditions were now in place for Greece to soon get approval for the remainder of the bailout.
Despite the welcome nature of the deal, the development nonetheless prompted the Fitch ratings agency on March 9 to downgrade Greece from a "C" rating to a "restricted default" rating.
The move was expected, with ratings agencies saying they consider the bond-swap deal to be tantamount to a default.
The two other major ratings agencies, Moody's and Standard and Poor's, have already downgraded Greece to default level.
The developments came as official data showed that the Greek economy shrank by 7.5 percent in the fourth quarter of 2011, worse than previously estimated, with the economy in recession for a fifth year.
The Greek government is pushing through drastic austerity measures and steps to make the economy more competitive.
The aim is to cut the Greek government's debt from 160 percent of gross domestic product, as it is currently, to some 120 percent of GDP by 2020.
With AP, AFP, Reuters, and dpa reporting