Greece seals rescue deal with EU and IMF

Greece has sealed a deal with the EU and IMF that opens the door to a multi-billion euro financial bailout but will require major sacrifices from the Greek people, Prime Minister George Papandreou said on Sunday. The aid package, expected to total up to 120 billion euros ($160 billion) over three years, represents the first rescue of a member of the 16-nation euro zone and is aimed at stemming a debt crisis that has shaken markets worldwide. "It is an unprecedented support package for an unprecedented effort by the Greek people," a sombre Papandreou told a televised cabinet meeting. "These sacrifices will give us breathing space and the time we need to make great changes," he added. "I want to tell Greeks very honestly that we have a big trial ahead of us." Finance Minister George Papaconstantinou gave details of the agreement before heading to a meeting later on Sunday with his euro zone counterparts in Brussels, where the aid is expected to win the bloc''s formal backing. The deal''s size would be announced in Brussels but it would cover a large part of Greek borrowing needs for the next three years, said Papaconstantinou. Under the plan, Athens would make budget cuts of 30 billion euros over three years, he added. In a statement, European Commission President Jose Manuel Barroso recommended that Europe activate the aid, calling the package of austerity measures "solid and credible". "This assistance will be decisive to help Greece bring itseconomy back on track and preserve the stability of the Euroarea," Barroso said. Greece and its international backers hope the deal canprevent the crisis from spreading to other euro zone memberswith fragile finances such as Portugal and Spain. But Papandreou faces a Herculean task in convincing Greeksto accept draconian austerity measures at a time when theeconomy is already in a deep recession. On Saturday, thousands marched in May Day demonstrations inAthens shouting slogans against new budget cuts they say willhurt the poor and plunge the country into a downward economicspiral. An ALCO poll released on Friday showed more than half ofGreeks plan to take to the streets in protest at the new cuts.

"HIGH DRAMA" Famed U.S. investor Warren Buffett said on Saturday heexpected continued "high drama" from the Greek crisis, addingthat it was impossible to predict how it would end. Although Greece makes up only about 2.5 percent of the eurozone''s economic output, its woes have shaken confidence in thecurrency bloc and deepened global fears about sovereign debtbuilt up during the financial crisis. In Germany, which as the bloc''s largest economy will beexpected to put up the lion''s share of the European aid, thereis deep resentment about rescuing Greece, which manipulated itseconomic figures in order to enter the euro zone in 2001 and haslived beyond its means ever since. Chancellor Angela Merkel insisted on making theInternational Monetary Fund (IMF) part of any rescue and madeGerman aid contingent on bolder austerity steps from Athens,delaying the rescue and underscoring deep divisions in the bloc. Economists say that if the rescue agreed on Sunday fails tocalm markets, European countries could end up footing a bill ofhalf a trillion euros ($650 billion) to save several nations ontop of Greece. Both Portugal and Spain saw their debt downgraded by ratingsagencies this week and could become targets for the marketunless they tackle their own deficits swiftly. "The problem has grown bigger, this fire is threatening tospread and hurt Greece further and the other euro zone countriesand economies," Papandreou told the Greek cabinet. "The cost ofputting it out is expected to be huge, and the burden thatGreeks will shoulder is even bigger."