Updated Thursday, December 13, 2012 at 05:31 AM
Greece's euro partners have agreed to hand over the next disbursement of the country's bailout loans.
The cash-strapped country will get a total of (EURO)49.1 billion ($64 billion) between now and March.
Greece needs the money to stay afloat and avoid a potential default. Officials said the country would get (EURO)34.3 billion ($44.7 billion) in the coming days.
The decision Thursday by the finance ministers of the 17 EU countries that use the euro came after Greece said it would buy back (EURO)31.9 billion ($41.5 billion) of its bonds from private investors at a third of their face value, lightening its crushing debt load and meeting a key condition to receive vital rescue loans.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
Finance ministers from the 17 EU countries that use the euro currency will on Thursday decide whether to hand over billions more to Greece, rescue loans the country needs to avoid going bankrupt.
Their meeting in Brussels comes just hours after finance ministers from the 27 countries in the European Union, which includes representatives from non-euro countries such as Britain and Poland, agreed to create a single supervisor for their banks, a key component of what many hope will eventually become a fully-fledged banking union.
`'Piece by piece, brick by brick, the banking union will be built on this first fundamental step today," said Michel Barnier, the EU Commissioner responsible for the monitoring of financial markets.
The agreement, which still has to be approved by the European Parliament, will make the European Central Bank the supervisor for banks in the eurozone and any other country in the EU that wants to opt in - Britain, for one, has said it has no intention of joining for fear of losing its ability to control what is Europe's biggest banking sector.
Only banks with assets over (EURO)30 billion ($39 billion) or those that represent 20 percent of their national economies will be placed under the direct oversight of the ECB, which can also supervise any other bank it wants within those countries that have agreed to be come under its orbit.
It's a major evolution in the ECB's role, whose main job up to now has been to set interest rates for the eurozone. The deal gives it broad new powers, including the ability to grant and withdraw banking licenses, investigate institutions, and financially sanction banks that don't follow the rules.
One of the key outcomes of the deal will be to pave the way for Europe's bailout fund to give direct aid to ailing banks - a measure considered vital to helping Europe dig its way out of its three-year-old debt crisis.
`'We stick to what we promised," said German Finance Minister Wolfgang Schaeuble. `'Painstakingly, we advance the cause of Europe."
Schaeuble and his counterparts in the eurozone are meeting again to evaluate the effectiveness of a Greek debt buy-back program meant to reduce the country's debt over the long term.
The prevailing view is that they will authorize the release of Greece's next installment of bailout loans - about (EURO)44 billion ($57 billion). Without the money, Greece would be facing bankruptcy and potentially have to leave the euro bloc.
"Today's decision on the Greek program will remove the clouds that are hanging over Greece," Olli Rehn, the European commission for monetary affairs, said on his way into the meeting.
In addition, the finance ministers will discuss the progress made in defining the terms of a bailout program for Cyprus, whose banking sector has been laid low by its exposure to Greece. But Jean-Claude Juncker, the head of the eurogroup, said Thursday morning that a final decision on Cyprus' program would probably not come until January.
And later Thursday, EU heads of state and government will gather in Brussels for a summit devoted to building a closer financial and political union, meant to avoid future financial crises.
The new banking supervisor, which will start work in March of next year and slowly ramp up its responsibilities until it is fully operational a year later, will likely be a main discussion point at the summit.
In the run-up to the summit, German Chancellor Angela Merkel told lawmakers that the leaders should also focus on how to get Europe growing again through wide-ranging economic reforms.
It was not immediately clear how many banks would fall under its direct supervision; officials gave figures that ranged from 100 to 200 banks, but they also stressed that the central bank would have the ultimate responsibility for all eurozone banks and lenders in any other EU countries that sign up. In effect, national authorities will simply be carrying out the ECB's instructions.
Rehn called the agreement "a breakthrough."
It's not yet clear when banks will be able to start asking for direct aid.
That step is crucial because weak banks remain at the core of Europe's financial problems. Many are teetering on the brink of bankruptcy because the investments they made in boom times have plummeted in value. Some governments have stepped in to save their banks only to worsen their own finances in the process.
European leaders want to shield troubled governments from the burden of supporting their banks. That would be a huge relief to countries like Spain, which are facing the prospect of taking on enormous debts in order to bail out their banks.
Under the new system, it would become tougher for banks to run afoul of good governance.
The magnitude of the deal was reflected in the scale of the fight in recent months: Concerns ranged from which banks would be covered to how the ECB would insulate its monetary responsibilities from the new powers to how the deal would affect EU countries that chose not to submit their banks to ECB oversight.
Countries that don't use the euro worried their voices in the body that creates banking regulation - the European Banking Authority - would be drowned out by the collective clout of the euro countries, particularly since countries with other currencies can opt into the supervision.
The EBA sets the technical rules that govern EU banking, and Britain in particular was nervous that the new supervision would mean all the banks under the ECB would vote together at the EBA, effectively steamrolling everyone else.
That concern appears to have been bridged by an agreement that measures can't pass in the EBA without at least some support from countries outside of the ECB's supervision.
Don Melvin in Brussels and David Rising in Berlin contributed to this report.