Eurozone finance ministers and the IMF clinched agreement on a new debt target for Greece tonight in a breakthrough towards releasing an urgently needed tranche of loans to the near-bankrupt economy.

After nearly ten hours of talks at their third meeting on the issue in as many weeks, Greece's international lenders agreed to reduce Greek debt by €40bn, cutting it to 124% of gross domestic product by 2020, via a package of steps.

The deal should open the way for a major aid instalment needed to recapitalise Greece's teetering banks.

It should also enable the government to pay wages, pensions and suppliers in December.

However, discussions were continuing on the methods to be used to lower Athens' debt burden, including a possible debt buyback and a lowering of interest rates on loans to Greece.

"It's going very slow, but we have financing and a Debt Sustainability Analysis. We've filled the financing gap until the end of programme in 2014," one official engaged with the talks said. A second official confirmed the figures.

Greek Finance Minister Yannis Stournaras said earlier that Athens had fulfilled its part of the deal by enacting tough austerity measures and economic reforms, and it was now up to the lenders to do their part.

"I'm certain we will find a mutually beneficial solution today," he said on arrival for the marathon talks.

Greece, where the eurozone's debt crisis erupted in late 2009, is the monetary union’s most heavily indebted country, despite a big "haircut" this year on privately-held bonds. Its economy has shrunk by nearly 25% in five years.

Negotiations had been stalled over how Greece's debt, forecast to peak at 190%-200% of GDP in the coming two years, could be cut to a more sustainable 120% by 2020.