Photo: The Canadian Press. All rights reserved.

Greek Prime Minister Lucas Papademos, left, speaks with Luxembourg's Prime Minister Jean-Claude Juncker, center, during a round table meeting of eurozone finance ministers at the EU Council building in Brussels on Monday, Feb. 20, 2012.  (AP Photo/Yves Logghe)

After more than 12 hours of talks, the countries that use to euro agreed early Tuesday to hand Greece $170 billion in further bailout loans to save it from a potentially calamitous default, an EU diplomat said.

The euro surged as the news broke, climbing 0.7 per cent to $1.328 in minutes.

The deal, details of which were still being worked out by European finance ministers in an all-night session in Brussels, was expected to bring Greece's debt down to 120.5 per cent of GDP by 2020, according to the official. That's around the maximum that the International Monetary Fund and the eurozone considered sustainable. Some eurozone ministers had indicated before the meeting that they would not accept a deal that didn't put Greece's debt on a sustainable path.

The official spoke on condition of anonymity because a formal announcement was pending.

The deal should also give the green light to a related debt relief from private investors, who are expected to take significant losses on Greek bonds they hold.