European finance ministers and the International Monetary Fund (IMF) have agreed a 110-billion-euro ($146 billion) deal to rescue Greece’s economy.
The announcement came after an emergency meeting in Brussels of finance ministers from the countries that use the euro single currency.
The bailout is a record for a single country and the first for a member of the 16-nation eurozone.
The deal is aimed at preventing Greece from defaulting on its debts.
It’s also meant to stem a debt crisis that has shaken financial markets and begun to spread to other eurozone countries saddled with large debts, such as Portugal and Spain.
Of the total package, 80 billion euros will come from Greece’s 15 eurozone partners and 30 billion from the IMF.
The loans will be released over a three-year period, with the first funds expected before May 19, when Athens must make a major debt repayment to creditors.
The rescue comes with some tough conditions.
Athens must make tough austerity measures including spending cuts and tax increases of some $40 billion over three years and a freeze on public sector salaries and pensions.
The aim is to cut Greece’s deficit to below 3 percent of gross domestic product by 2014. It currently stands at 13.6 percent.
The austerity drive has already prompted street protests, and there were clashes in Athens on May 1 between police and demonstrators.
But Greek Prime Minister George Papandreou, in a televised cabinet meeting earlier in the day, said the nation had to make big sacrifices.
Wearing a tie in a color Greeks normally reserve for funerals, Papandreou said, "I want to tell Greeks very honestly that we have a big trial ahead of us."
His finance minister, George Papaconstantinou, said the country had to choose between “collapse and salvation."
"We are in a rapidly changing environment. We're in an environment where we are confronted with the international markets that are not giving us the time to do the adjustments that we think are necessary. This is why we have been called to take these particularly harsh measures, and we realize that they are," Papaconstantinou said.
The deal still needs to be approved by some countries’ parliaments.
A special summit of the euro countries has been called for May 7 to launch formally the rescue plan.
IMF chief Dominique Strauss-Kahn said he expected the IMF board to approve its 30-billion euro share this week.
Public opposition to the deal has been strongest in Germany, the eurozone’s biggest economy and the largest contributor of loans, at around 22 billion euros.
But German Chancellor Angela Merkel finally threw her full support behind the package, calling it today “very ambitious” and vowing to achieve swift parliamentary approval of Berlin’s share.
EU Economic Affairs Commissioner Olli Rehn portrayed the deal as favorable to borrower and lender alike.
Greece will pay 5 percent interest on the loans -- about half the rate demanded by nervous investors to buy Greek debt in recent days.
As for the rescuers, he said, they will be paying a lower interest rate to borrow the necessary funds.
with agency reports