The deal, which is more an agreement to begin negotiations on a new bailout package rather than a fully finalised settlement, will depend on whether the Greek parliament agrees to rush through a series of tough austerity measures by Wednesday 15 July.
An exhausted looking European council president, Donald Tusk, announced the 11th hour deal early on Monday morning, saying, "Today, we had only one objective: to reach an agreement. After 17 hours of negotiations, we have finally reached it".
Tusk added, half-jokingly, "One can say that we have 'agreekment'. Leaders have agreed in principle that they are ready to start negotiations on a European stability mechanism (ESM) programme, which in other words means continued support for Greece.
RELATED CONTENT
However, he warned that, there would be" strict conditions" linked to bailing Athens out, adding that "the approval of several national parliaments, including the Greek parliament, is now needed for negotiations on an ESM programme to formally begin."
Greece needs around a €7bn cash injection by Monday 20 July to bridge its current financial situation and to keep its banks afloat and will now have to acquiesce to even tougher conditions than those rejected in last week's Greek referendum, including German demands to transfer control of around €50bn of Greek state assets to a new privatisation fund.
Detailed information on the how and when the bailout deal are yet to be fully surface, although it's clear that Greek prime minister Alexis Tsipras will have a difficult time convincing his country's legislators that they should now to accept harsher terms from their creditors than those rejected last week.
European commission president Jean-Claude Juncker, who also looked washed out from the overnight discussions, reiterated his view that Tsipras' decision to walk away from the original deal had been a mistake.
"I said before the referendum that the situation would be worse after the referendum," said Juncker, adding, "This has proven to be true."
"But in this compromise, because it is a compromise, there are no winners and no losers. I don’t think the Greek people have been humiliated. And I don’t think that the others have lost face. It’s a typical European arrangement," he added.
The tough conditions set by Greece's creditors are partly due to the collapse of trust following Tsipras' decision to reject the previous, more favourable, bailout package.
Press reports suggest that German chancellor Angel Merkel and her finance minister Wolfgang Schäuble have imposed several 'red lines' that will see no new negotiations without a visible show by Wednesday of Athens' political commitment to agreeing a series of tough reforms.