Eurozone finance ministers meeting in Brussels have agreed to rescue Greece from potential bankruptcy with a $145-billion, three-year bailout deal.
The agreement between the International Monetary Fund and countries that use the euro is also designed to prevent Greece's debt crisis from dragging down other EU countries suffering from financial woes, like Spain and Portugal.
To secure the agreement, the Greek government tabled a program of financial reforms that would whittle down public spending and boost taxes for several years.
The deal awaits parliamentary approval by some eurozone countries.
However, Jean-Claude Juncker, the head of the eurogroup, said Greece would receive its first injection of funding by May 19. The Greek government has a 10-year bond worth euro8.5 billion ($11.2 billion) that's due to mature on that date.
The eurozone would pitch in euro80 billion under the terms of the deal, of which euro30 billion would be released this year, Juncker said. The IMF would provide the remainder of the funds.
As the eurozone's biggest economy, Germany would be the largest donor. It has also been the Greek government's harshest critic.
Germany's Chancellor, Angela Merkel, had been unwilling to release the money, saying that the cash-strapped Mediterranean country needed to implement further cost-cutting measures.
Worries that Germany could delay the release of bailout funds left stock markets reeling last week. Greek officials have since proposed another set of austerity measures that include raising taxes, reducing pay for civil servants and cutting pensions.
After Greece announced the new measures, Merkel said she would push for Germany to free up euro8.4 billion before next weekend.
"That is what I will lobby for," she said. "It is a sustainable program, spread out over many years."
"I think that this is the only way for us to return the euro to stability."
The goal of the austerity program is to push Greece's deficit to less than 3 per cent of the country's gross domestic product by 2014. Currently, its deficit is 13.6 per cent of GDP.
The proposed financial measures would save the government euro30 billion by 2012, Greek Finance Minister George Papaconstantinou said. Greece's public debt would hit 140 per cent of GDP in 2013, and would begin receding in 2014.
"We are called on today to make a basic choice. The choice is between collapse or salvation," Papaconstantinou said.
Greek Prime Minister George Papandreou has said he would do everything in his power to keep the country from defaulting on his country's public debts.
"The avoidance of bankruptcy is the national red line," he said in a televised speech. "I want to be clear to all. I have done and will do everything so the country does not go bankrupt.
"The alternative course would be a catastrophe and greater pain for all."
The country's financial crisis has caused considerable unrest in the streets of Greek cities. On Saturday, violence erupted during anti-government protests being held as part of the annual May Day rallies. And Greek unions plan to hold a general strike Wednesday in reaction to the proposed cuts.
"These are the harshest, most unfair measures ever enacted," Stathis Anestis, a spokesperson for Greece's largest union, told The Associated Press.
"That is why our reaction will be decisive and dynamic. You can't always make the workers pay for the results of failed policies."
EU President Herman Van Rompuy has called for a May 7 meeting of eurozone states to "conclude the whole process," once parliaments in Germany and elsewhere have debated the bailout plan.
With files from The Associated Press
