Greece seals rescue deal

Greece has sealed a deal with the European Union and the International Monetary Fund that opens the door to a multi-billion euro financial bailout and will require big sacrifices from the Greek people, Prime Minister George Papandreou said on Sunday.

Those sacrifices amount to budget cuts of 30 billion euros ($40 billion) over three years, on top of measures already agreed. Salaries and pensions in the public sector would be frozen during the three-year programme while a fund backed by the IMF and EU would be set up to help Greek banks. Value-added tax and duties on fuel and alcohol will rise sharply.

The government told Greeks, who are protesting against the austerity drive, that they had to chose between a rescue or an economic collapse.

The aid package is expected to total up to 120 billion euros ($160 billion) over three years.

“It is an unprecedented support package for an unprecedented effort by the Greek people,” Papandreou said. “I want to tell Greeks very honestly that we have a big trial ahead of us.”

Finance Minister George Papaconstantinou outlined the deal but said its size would be announced when he attends a meeting of his euro zone counterparts in Brussels.

The deal would cover a large part of Greek borrowing needs for the next three years, Papaconstantinou told a news conference. “The choice is between collapse or salvation.”

Athens promised to slash its budget deficit to the EU limit of three per cent of GDP by 2014 from 13.6 per cent last year.