And the euro zone heads of state and government also agreed on the need to recapitalize European banks and to increase the firepower of the euro zone bailout fund, the EFSF, to about one trillion euros.
Following are comments from leaders after the talks:
GERMAN CHANCELLOR ANGELA MERKEL ON GREEK DEBT:
"Our goal is that the debt of Greece by 2020 is 120 percent (of GDP)."
"A nominal haircut of 50 percent has been agreed. On the basis of this, we will have a new program for Greece with a value of 100 billion euros."
"There will be a reinforced monitoring regime in connection with the fulfillment of the Greek obligations."
"That will be anchored in a memorandum of understanding. There will be a permanent presence there. It will be possible to monitor the measures taken by Greece. I think that this is better than when every three months a 'troika' travels there and back, a permanent system of supervision."
ON THE EUROPEAN FINANCIAL STABILITY FACILITY:
"We know that the optimization of the EFSF is necessary ... in connection with avoiding any contagion effect. The ECB is not involved.
"We have agreed that by the end of November the... framework... will be worked out by the finance ministers. It is important that through these two options we maximize the effectiveness of the EFSF, that we have a leverage of four to five times.
"It is very difficult, without having ever used the instruments, to say what this really means. We believe we will have a lot of flexibility to protect the euro and avoid contagion risks. We say that we can achieve around about 1 trillion euros."
EUROPEAN COMMISSION PRESIDENT JOSE MANUEL BARROSO ON THE ROLE OF BANKS IN ENDING THE CRISIS:
"Our goal is to ensure banks maintain lending to the real economy.
"Tonight's conclusions also make clear that banks should be subject to constraints regarding the distribution of dividends and bonus payments until recapitalization is complete.
"The technical work needed to finalize certain aspects of this package will be completed by the relevant authorities in the coming weeks."
ON SITUATION IN ITALY:
"There are here several measures and commitments. And there is afterwards a task given to the (European) Commission and to the Italian authorities to provide all of the necessary data for the implementation.
"So the key is implementation. This is the key. It is not enough to make commitments, it is necessary now to check if they are really implementing."
OUTGOING EUROPEAN CENTRAL BANK PRESIDENT JEAN-CLAUDE TRICHET
ASKED IF HE THOUGHT THE DECISIONS ARE ENOUGH TO STEM THE
"I think they have to be fully implemented... as rapidly and effectively as possible. And I have only to say that what counts is the level of confidence.
"What I heard in this European Council was the expression of the will of the heads (of state and government). That is in my opinion extremely important. What is backing this orientation is the will, the collegial will, if I may, of the heads of state and government that are behind.
"But again no complacency -- very hard work, very hard work."
FRENCH PRESIDENT NICOLAS SARKOZY
"The summit allowed us to adopt the components of a global response, of an ambitious response, of a credible response to the crisis that is sweeping across the euro zone."
EUROPEAN COUNCIL PRESIDENT HERMAN VAN ROMPUY
ON COOPERATION IN EUROPE:
"Compared to eight or 10 years ago, the pressure which leaders put on each other has become much more effective, as the events of the last days show. Today no government can afford to underestimate the possible impact of for instance public debts or housing bubbles in another euro zone country on its own economy; they would be punished by the voters, and by the markets. Peer pressure has become more effective, because the money of their taxpayers is at stake."
ON ROLE OF THE EUROPEAN CENTRAL BANK (ECB) AND INCOMING ECB
PRESIDENT MARIO DRAGHI:
"If the current president or the upcoming president are saying that they will intervene until the new mechanism is really put into place, it is up to them to decide. So we are not interfering in this, we are not asking for it. We take note of the declarations made recently by Mr Draghi but we have no demands and nothing to request."
"We want to put Greece on track, where in 2020 it will have reduced its public debt to 120 percent of GDP. Since July, market conditions have worsened. The new plan includes additional effort by the state sector.
"It also includes a voluntary contribution by private creditors who have lent to Greece. It was agreed by them tonight and amounts to nominal discount of 50 percent of notional Greek debt."
ON EUROPEAN FINANCIAL STABILITY FACILITY (EFSF):
"A sufficient firewall against contagion -- thanks to an agreement to multiply to up five-fold the firepower of the EFSF. The leverage could be up to one trillion (euros) under certain assumptions about market conditions and investors' responsiveness in view of economic policies.
"We have identified two approaches for the EFSF. The first one aims at getting credit enhancement to sovereign bonds issued by member states. Under the second approach, the fund could set up one or several (special purpose vehicles) SPVs to finance its operations. Each option could lead to leverage of up to four to five times. They can be used simultaneously so as to increase the robustness of the financial strategy."
"We are all aware the situation is serious. The situation was evolving into a systemic concern. This threat has to be contained."
IRISH PRIME MINISTER ENDA KENNY
ON BANK RECAPITALISATION:
"In respect of recapitalization of the European banks this has been achieved without any damage to Irish interests."
ON IRISH SITUATION:
"The communication is very clear that this is a unique and individual situation for Greece and clearly there is the continued funding for Ireland. This is well recognized and specifically presented by the leaders."
Following are comments from EU leaders earlier:
POLISH PRIME MINISTER DONALD TUSK ON EU INTEGRATION:
"I had the impression all partners understand that we need enhanced integration, not only at the level of the Eurogroup but at the level of the whole European Union."
ON BANK CAPITAL QUALITY:
"The key issue was the issue of high quality capital, the 9 percent ratio that was adopted that we need to maintain this ratio. And we also adopted certain elements of the way we should proceed to attain this goal. An emotional element during this debate, was the fact of making this exceptional circumstance and not permanent element... so this will not be a permanent solution for the future."
ON AGREEING A PACKAGE OF MEASURES:
"The banking element is part of a broader package... All participants were fully aware that the draft annex to this statement concerning the recapitalization of banks will work only when the euro area approves other elements that are currently being debated.
"Bank recapitalization without the remaining elements, such as the so-called firewall... wouldn't have any chance of success. So the statement today is a pre-condition and it's really an introduction for looking for further elements in the euro area with greater comfort."
ON POLITICAL AGREEMENT:
"Bank recapitalization is an issue concerning all member states. This project cannot be seen in isolation and independently of the other elements. My impression is that all 27 accept the idea of bank recapitalization in this statement.
"If you are asking whether we are expecting that all decisions will be taken today during the euro area meeting I would be very cautious to make such a statement.
"I think we are very close to a full political agreement, however there are some important details that might perhaps require more time.
"It is important, however, that tonight the euro area should demonstrate that a political agreement has been achieved and the only things that remain are important, but only technical issues."
BRITISH PRIME MINISTER DAVID CAMERON
"We made good progress tonight. It is very much in Britain's interest that we sort out these problems and solve this crisis.
"We made good progress on the bank recapitalization. That wasn't watered down, it has now been agreed. It will only go ahead when the other parts of a full package go ahead and further progress on that needs to happen tonight."
Following are comments from earlier, ahead of the EU leaders' meeting:
IRISH PRIME MINISTER ENDA KENNY
"I understand there has been some progress made in a number of areas, but clearly leaders of the euro zone will have their own individual points to put up here. As I said, the important thing here that the fully flexibility of the facilities that were approved be used now to bring certainty, and certainty of intent, for everybody, from both the (European) Council and the euro zone in particular."
AUSTRIAN CHANCELLOR WERNER FAYMANN ON HAIRCUT FOR GREEK BONDHOLDERS:
"The wish is to come up with a voluntary haircut, I think that is right, but until that is negotiated we can't announce it. It's still open."
"We always said 40-50 percent is part of the negotiations but we have to be fair because we don't know what the counterparties would ask for that."
ON EUROPEAN FINANCIAL STABILITY FACILITY (EFSF):
"The other issue is to improve the way the rescue fund is used. To make it strong enough that it would last for a few months or years would be an elementary step forward. If we always have to call summits against the background of a crisis it doesn't create a lot of trust.
"I'm very much in favor of making better use of the rescue fund and giving it more bearing capacity."
DUTCH PRIME MINISTER MARK RUTTE
"We need a real solution, we won't buy anything with mediocre compromises. Some things really need to happen.
"We need today to talk about Greece and ensure that Greek debt is sustainable and that we're finally finished with this business. We must talk about the banks and how they get through this difficult phase.
"We must ensure that this bazooka, the European rescue fund, is strong enough to show the market that we mean it. We also have to make sure this can't happen in the future. We need strong supervision and live up to our promises."
"We are in this job to take decisions. It's not easy, but it really has to happen."
BELGIAN PRIME MINISTER YVES LETERME
"I think we will have a solution for Greece. It is very important to ask for a voluntary effort by the banks to reduce Greece's debt. It is also an effort through the EFSF to make credit accessible at reasonable rates for Greece."
ON WORK AHEAD:
"I think it is work that advances step-by-step. But the step we are going to take today or tonight is a very important step toward a total restoration of the confidence in the euro zone."
"It's an economic union in the making so it does not yet have the firepower it should have, but we're taking steps forward. Let's hope for tonight."
ON EUROPEAN FINANCIAL STABILITY FACILITY (EFSF) BAILOUT FUND:
"Let's hope we succeed in giving (the EFSF) enough convincing firepower. It's one of the two to three most important points we still have to tackle."
"I think that in effect we would need to be a whole bit above 1,000 billion euros."
GREEK PRIME MINISTER GEORGE PAPANDREOU
"Our challenge today is not simply to save the euro. It is to safeguard the ideas we cherish so much in Europe: Peace and cooperation amongst our nations, social cohesion and solidarity without prejudice amongst our people.
"From our side the Greek people are making a superhuman effort to put our house in order, to make our economy confident, viable, prosperous and create a better future for the Greek people, for our country.
"Now is the time for the European leadership to collectively take decisions to end the uncertainty, end the crisis, turn the page and make sure we make a big step forward for the better future and prosperity and security of our peoples in Europe."
EUROGROUP PRESIDENT AND LUXEMBOURG'S PRIME MINISTER JEAN-CLAUDE JUNCKER
"Our Italian friends know well that we have to assume that we will be informed this evening that there will be significant, structural (budget) consolidation efforts from Italy. That is a must."
ON AGREEING DECISIONS:
"I think that if we make our decisions in such a way that they work under pressure, then we will have made the right decisions."