Greece is one of the most indebted countries in Eurozone. So much so, that it is almost on the verge of bankruptcy. In the past, many options have been explored to reduce the country's debt. And in the latest move, both Eurozone and International Monetary Fund (IMF) have taken the matter in their hands. Both these institutions have clinched an agreement to reduce Greece's debt by 40 bn Euros to approximately 124% of the Gross Domestic Product (GDP) by 2020. To reduce the debt, interest rate will be cut on the loans given to Greece. For some loans maturity will be extended with the option to defer the interest payments. It has also been agreed that Greece will be given some financial assistance to fulfill its debt obligations provided it meets certain conditions. This is likely to reduce the uncertainty in Eurozone and strengthen the Euro.

While these steps will reduce the debt burden on Greece, it would be interesting to see whether Eurozone members will write off some of the loans as a part of debt reduction program. If that is done, the member nations who have lent to Greece may incur a huge loss. Hence, that possibility appears remote as of now. But if Greece diligently implements its austerity plans, a haircut on the existing debt is not ruled out completely.