"They've made very good progress on the key issues they needed to make progress on, recapitalising the banks, reinforcing the firewalls and resolving the Greek situation," he said.

However Osborne cautioned that "we've now got to get the details."

Osborne said that although Britain had no plans to join the eurozone, London had a clear interest in seeing the countries using the single currency emerge from their problems because they were having a knock-on effect.

"It is going to be a difficult road ahead, but they are on the right road and it's massively in the British national interest that they sort these problems out, because the instability in the euro is having a chilling effect on the British economy," he told BBC radio.

The last-ditch deal sealed at a Brussels summit is aimed at fixing a festering debt crisis, shoring up its bailout fund, pledging new funds for debt-ridden Greece and pushing banks to share the pain.