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.
"We have built the support mechanism out of nothing," Papandreou told a televised cabinet meeting. "A few days ago we asked for its activation and today we ratify the agreement. It is an unprecedented support package for an unprecedented effort by the Greek people."
Papandreou said that unless Greeks were willing to make major sacrifices the country would go bankrupt. "These sacrifices will give us breathing space and the time we need to make great changes," he said.
The deal represents the first rescue of a member of the 16-nation currency bloc by its fellow countries, a step that EU treaties explicitly discourage but which EU policymakers say is necessary to save the euro zone from breaking apart.
A meeting of euro zone finance ministers, scheduled for 1400 GMT in Brussels, is expected to give its go-ahead to the package aid, which could reach up to 120 billion euros ($160 billion) over three years and will come in return for tough austerity measures.
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, Papaconstantinou told a news conference.
Greece will cut the deficit by 30 billion euros over three years under the package of austerity measures with the EU and IMF, Papaconstantinou said.
Under the deal with the European Union and International Monetary Fund (IMF), Greece plans to cut the deficit to 8.1 percent of gross domestic product (GDP) in 2010, 7.6 percent in 2011 and 6.5 percent in 2012.
The deficit would not fall below the EU's 3 percent of GDP limit until 2014. Debt was expected to rise to nearly 150 percent in 2013, before falling from 2014.
"We are all being called to make a choice," Papaconstantinou told a news conference in Athens.
"The choice is between collapse or salvation. The choice is between fleshing out a very ambitious and difficult 3-year programme of fiscal consolidation, a programme of structural reforms ... or the country reaching an absolute dead-end."
He said the measures included a rise in value-added tax (VAT) to 23 percent from 21 percent, a 10 percent hike in fuel, alcohol and tobacco taxes and a further reduction in public sector salaries and pensions.
Greece would be shielded from exposure to debt markets for three years under the plan, he added.
The Greek government is now forecasting GDP to contract by 4.0 percent in 2010 and 2.6 percent in 2011, before returning to growth of 1.1 percent in 2012.
Athens plans to cut its budget deficit by 24 billion euros ($31.9 billion) to secure up to 120 billion euros in aid over three years. Investors hope this will stop the Greek crisis from sinking other fragile EU economies.
But the government faces a battle with unions, angry at the scale of the cutbacks, and social unrest could spread.
Also, on Saturday, thousands marched in May Day demonstrations in Athens shouting slogans against austerity measures they say will hurt the poor and drag the country further into recession.
"No to the IMF's junta!," protesters chanted, referring to the military dictatorship which ruled Greece from 1967 to 1974. "Hands off our rights! IMF and EU Commission out!," the protesters shouted as they marched to parliament.
More than half of Greeks say they will take to the streets if the government agrees to new austerity measures, according to an ALCO poll released on Friday by the newspaper Proto Thema.