Greece outlined strict new austerity measures required by an international bailout and Germany says there was a good chance it would approve its part of the euro-zone and International Monetary Fund rescue before next weekend.
The finance ministers of the 16 EU nations that use the euro were holding an emergency meeting in Brussels to discuss the plan — the first-ever bailout of a euro-zone country — under which euro-zone countries and the IMF will extend loans to Greece over three years.
The exact amount of the three-year package will be agreed on during the meeting, but is expected to be about 120 billion euros ($160 billion).
Germany, the euro zone's largest economy and Greece's toughest critic, will be the largest contributor of loans, but has been reluctant to release funds. Chancellor Angela Merkel has insisted Greece needed to implement more austerity measures — a move which the country made Sunday.
Berlin needs to pass the issue through parliament before it can approve activating its part in the rescue.
Merkel said she would push for Germany to free up the funding by Friday, while her finance minister, Wolfgang Schaeuble, said in Brussels that "we have good chance to finalize the legislative process in Germany by Friday."
Earlier Sunday, Greece outlined strict measures, including cuts in civil servants' salaries and pensions, and tax increases, as part of an agreement reached late Saturday night with the IMF and EU.
"We are called on today to make a basic choice. The choice is between collapse or salvation," Greek Finance Minister George Papaconstantinou said before flying to Brussels.
The measures aim to cut the deficit to below 3 percent of gross domestic product, within EU limits, by 2014. The deficit currently stands at 13.6 percent.
Merkel, speaking to reporters in Bonn, welcomed that Greece had been able to work out a deal and indicated she would push for parliament to pass legislation freeing up the 8.4 billion euros the nation will contribute by Friday.
"That is what I will lobby for," Merkel said.
"It is a sustainable program, spread out over many years," she said, describing the deal as "difficult, but absolutely necessary."
"I think that this is the only way for us to return the euro to stability," Merkel said of the Greek bailout.
Merkel will meet Monday with her Cabinet and parliamentary party leaders to set the process in motion. Merkel's Christian Democrats and their coalition partners the Free Democrats hold a majority in parliament.
The Greek announcements also won praise from the EU's monetary affairs commissioner, Olli Rehn.
"I'm confident that the Eurogroup, the euro area member states, will today endorse this program and I'm recommending to the eurogroup today to activate the mechanism," he said.
It remains unclear, however, whether Sunday's meeting in Brussels will be enough to give final approval for Greece to start receiving the money or whether a summit of euro-zone heads of government will be required.
Greece has 8.5 billion euros worth of a 10-year bond maturing on May 19.
Papaconstantinou said savings worth 30 billion euros through 2012 would be achieved through public service and pension pay cuts, higher taxes and streamlining government.
Annual holiday bonuses will be capped at 1,000 euros ($1,330) per year for civil servants and scrapped for those with gross monthly salaries over 3,000 euros ($3,995), he said. Pensioners' bonuses will also be capped at 800 euros and canceled for those paid more than 2,500 euros ($3,330). Salary cuts will not extend to the private sector, as had been widely feared.
Greeks receive their annual pay in 14 salaries, receiving extra at Christmas, Easter and for their summer vacations.
Taxes would also be increased, including further hikes on fuel, alcohol and tobacco. The top bracket of sales tax rises from 21 percent to 23 percent.
Papaconstantinou said his country's debt would reach 140 percent of GDP in 2013 and start falling from 2014, while economic output is set to contract by 4 percent in 2010 and by 2.6 percent in 2011 before it starts recovering slowly beginning in 2012.
The minister said his government hoped to be able to return to borrowing on the market soon, but that the plan would allow the government breathing space to implement its austerity program and put its finances in order.
"We are confronted with international markets that do not give us the time to make the necessary adjustments," he said. Greece has seen its borrowing costs skyrocket to more than four times those of Germany on the international market in recent weeks.
Earlier, Prime Minister George Papandreou said he would do everything he could to avoid default.
"The avoidance of bankruptcy is the national red line," he said in a televised speech to his Cabinet. "I want to be clear to all. I have done and will do everything so the country does not go bankrupt."
Papandreou called on Greeks to make "great sacrifices" to avoid a catastrophe, and said the country's problematic civil service would bear the brunt.
There will also be deep cuts in defense spending and hospital procurement, the prime minister said.
"The alternative course would be a catastrophe and greater pain for all," he said.
Greek unions planned a general strike Wednesday against the cuts. Violent clashes broke out Saturday during anti-government protests at May Day rallies.
"These are the harshest, most unfair measures ever enacted. That is why our reaction will be decisive and dynamic. You can't always make the workers pay for the results of failed policies," Stathis Anestis, spokesman for Greece's largest umbrella union, GSEE, told The Associated Press.
Anestis indicated the union wants the EU to offer more labor protections.
"We are asking all Europeans to think again: What kind of Europe do they want? What kind of society? What kind of employees?" he said.
The government will submit special emergency legislation to Parliament, which is expected to approve the measures by Friday.
Some economists believe that Greece's adjustment will be painful, but no more so than when the country devalued its then currency, the drachma, twice in the 1980s and once in the 1990s.
Platon Tinios, an economics professor at Piraeus University, said the previous austerity programs demanded a lot, but that eventually leaders gave up on them for political reasons. Past experience does not make him confident that politicians will stick to their commitments, he said.
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