George Osborne commends eurozone on Greece aid package

He stressed to taxpayers that the Government had delivered on its promise to keep the UK out of the bailout.

But he said Britain had a "huge interest" in a stable eurozone and called on political leaders to make the "longer term changes needed to make the euro work".

At an emergency summit in Brussels, eurozone leaders agreed a new bailout package for debt-laden Greece worth 109 billion (£95.9 billion) with a lower interest rate and more time to pay it off.

Mr Osborne said last night: "The first thing British taxpayers should know is that we have delivered on our promise to keep the UK out of the Greek bailout.

"But Britain also has a huge interest in a stable eurozone. Today's package from eurozone countries to support Greece is an important and positive development.

"Even more positive is the demonstration that eurozone political leaders can take decisive economic action.

"That is what they now have to sustain, not just on the details of this package, but also on the longer term changes needed to make the euro work.

"They have shown they can get a grip, now they need to keep it."

At the emergency summit in Brussels, the eurozone leaders opted to double the maturity of Greece's package from seven and a half years to 15 years and cut the interest rate to about 3.5%.

The softer lending conditions were also extended to bailed-out Portugal and Ireland in an attempt to finally ensure the stability of the single currency and stave off debt contagion from spreading to Italy and Spain.

In a joint statement, the leaders said: "We agree to support a new programme for Greece and, together with the IMF and the voluntary contribution of the private sector, to fully cover the financing gap.

"The total official financing will amount to an estimated 109 billion (£95.9 billion).

"This programme will be designed, notably through lower interest rates and extended maturities, to decisively improve the debt sustainability and refinancing profile of Greece."

Another key aspect of the agreement is an expansion of the role of the European bail-out programme - the European Financial Stability Facility (EFSF) - so it can act more freely.

Under the plan the private sector will provide 37 billion (£32.5 billion) in support to Greece.

French president Nicolas Sarkozy said there would be no private sector involvement with Ireland or Portugal.

"With respect to the two other countries under the programme, Ireland and Portugal, we are going to reduce rates and lengthen the maturities of the loans granted by the European monetary fund but we will exclude any private sector involvement," Mr Sarkozy said.

President of the European Council Herman Van Rompuy said the eurozone problems could only be solved at the highest level.

"We had to act quickly," he said.

"Convening this meeting focused the minds and accelerated finding a solution.

"I could not allow a difficult situation to become a dangerous one."

European Commission president Jose Manuel Barroso said for the first time in the crisis, politics and the international money markets had come together.

"We needed a credible package, we have a credible package," Mr Barroso said.

"It deals with both the concerns of the markets and citizens.

"It responds also to the concerns of all member states of the euro area.

"It is a package that every government has signed up to.

"For the first time in the crisis, politics and markets are coming together."

Greek prime minister George Papandreou said the agreement would help ease the burden on his country.

"We now have a programme and a package of decisions which create a sustainable path for Greece, a sustainable debt management for Greece, and this in the end of course will mean not only the funding of a programme, but it will also mean the lightening of the burden on the Greek people," he said.

Mr Papandreou said Greece was committed to implementing the programme, to make the country viable, just and one of growth and job creation.

The latest summit had been demanded by France but opposed by Germany and other countries, concerned that more inconclusive talks would only worsen the market response.

The measures are designed to be a eurozone-wide move to pull the EU back from the brink of financial crisis and prevent the contagion effect from spreading to economies such as Italy and Spain.