CORRECTED: Greece promised rescue package, but investors wary

(Corrects fall in euro to more than 12 pct from 14 pct in paragraph 12)

ATHENS/BRUSSELS - European nations aim to formally launch the biggest ever financial bailout of a country this week, hoping to calm markets wary that Greece's rescue may be the first of several, expensive measures to shore up other economies.

The euro fell on Monday despite the EU/IMF bailout announced at the weekend on doubts about whether Greece can sustain the austerity measures it has promised in exchange for the 110 billion euro ($146 billion) package and if other euro zone countries are vulnerable.

Economists said that if the emergency aid fails to win over skeptical investors -- and gain the necessary parliamentary approval by Germany among others -- European countries could end up footing a bill of half a trillion euros ($650 billion) to save other fiscally weak nations.

There's a lack of conviction that this is the silver-bullet solution. The longer-term sustainability of this level of austerity has got to be open to question, said Tony Morriss, senior currency strategist with ANZ Bank in Sydney.

There are a couple of issues for the market to digest: short term is the passage through government parliaments, particularly in Germany. Secondly, there's the durability of plans like this when there is a severe austerity measure and political protests over the weekend.

The other issue is would this mean that the market will focus on the longer-term sustainability of countries like Portugal and Spain? he added.

The euro, which analysts had expected to rally in relief over the bailout, fell 0.9 percent to $1.3221 in Asia after initially climbing as high as $1.3359 after the news.

Economists said it would likely remain weighed down by the political uncertainty and doubts that Greece would be able to carry out promised spending cuts and tax hikes worth 30 billion euros over three years, on top of belt-tightening measures already taken.

Greece intends to bring its fiscal deficit down to the EU limit of 3 percent of gross domestic product by 2014 from 13.6 percent in 2009.

For the week ahead, the euro could see some upside given the unprecedented aid package laid out for Greece released over the weekend, said economists at United Overseas Bank in Singapore.

But this may be short-lived given continuing concerns about other European countries' sovereign risk, the lagging euro zone growth, and extent of Greek ability to implement the belt-tightening programs.

The euro has fallen for five consecutive months, the longest string of losses since the worst of the financial crisis in 2008. Since a December high above $1.50, the euro has fallen more than 12 percent, as the Greek fiscal crisis called into question the stability of the euro zone.

SOMBER NOTE

The first rescue of a member of the 16-nation bloc aims to stem a debt crisis that has shaken markets, dented confidence in the euro and begun to spread to fellow euro zone weaklings Portugal and Spain. Berlin's hesitancy has fueled market panic.

Euro zone ministers, meeting in emergency session on Sunday, approved the three-year package of emergency loans after Greece committed itself to the painful austerity measures that have sent thousands of Greeks into the streets in protest.

Crucially, the aid would be released in time for Athens to make a big debt repayment to creditors on May 19.

While the rescue package should remove the threat of a Greek default and reduce the pressure that has sent borrowing costs for it and other highly indebted euro zone states soaring, the aid still needs parliamentary approval by Germany and other states.

Euro zone leaders will hold a special summit on Friday to formally launch the aid, following weeks of tough talk and procrastination due to public opposition to handouts for Greece.

German politicians have voiced reluctance to approve the rescue, posing a challenge to Chancellor Angela Merkel who said she would fight for parliamentary approval by the end of the week. Berlin's share of the loans is the biggest of any EU state at about 22 billion euros out of 80 billion.

International Monetary Fund chief Dominique Strauss-Kahn forecast the IMF board would approve its 30 billion euro contribution to the package this week.

U.S. President Barack Obama said on Sunday he welcomed Greece's ambitious reform program and praised the support Athens had from fellow euro zone members.

However, Greek Prime Minister George Papandreou struck a more somber note.

It is an unprecedented support package for an unprecedented effort by the Greek people, Papandreou, wearing a dark purple tie, the color used for funerals in Greece, told a televised cabinet meeting.

(Additional reporting by Kevin Plumberg in Hong Kong)

(Writing by Miral Fahmy, editing by Neil Fullick)