ATHENS, Greece — Near-bankrupt Greece saw its borrowing costs fall sharply Monday and promised to press ahead with major financial cutbacks and reforms after the European Union unveiled a $1 trillion plan to contain the spreading debt crisis and boost the euro.
“First we had to save Greece before we could change it,” Prime Minister George Papandreou said after talks with opposition party leaders at an emergency meeting on the economy.
“This mechanism gives us time to make serious and major reforms.”
Under the three-year plan adopted in Brussels early Monday, countries from the 16-nation eurozone would promise backing worth $560.8 billion for troubled governments. The International Monetary Fund would contribute an estimated additional euro250 billion ($318.65 billion) and the EU euro60 billion ($76.5 billion).
Separately, eurozone leaders on Saturday gave final approval for a $100 billion rescue package of loans to Greece for the next three years to stave off default. The IMF also approved its part of the rescue package — on Sunday.
“We have said that this is not only Greece’s problem, it is global. It is a problem that concerns the international financial system and the need for adjustments and reforms in that system,” Papandreou said.
Last week, global markets suffered big losses and the euro plunged on fears the Greek debt crisis could spread to other weak European economies.
Greek Finance Minister George Papaconstantinou said Monday the agreements meant his country would have no trouble paying off creditors.
“Over the next few days, payment will start of the first section of the loans from the European Union and the International Monetary Fund, so that the country has no problems whatsoever with its borrowing needs and servicing its debt this month, and for months to come,” Papaconstantinou said.
Greece was forced to stop borrowing from international markets after the interest demanded by investors to buy its bonds skyrocketed, reaching more than 4 times that paid by EU powerhouse Germany.
The international loans were the country’s only shield against bankruptcy on May 19, when some euro9 billion in debt must be redeemed.
In return, Athens announced new painful austerity cuts over the next three years, prompting union anger and violent protests last week in which three people died.
Unions, which complain that low earners and pensioners are being unfairly targeted, said they are planning a new rally Wednesday. “We must save the economy, but first of all we must save (Greek) society,” the GSEE private sector umbrella union said in a statement.
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