Greek political leaders clinched a long-delayed deal on austerity measures required to secure a second bailout in two years but the country's skeptical lenders demanded more cuts and a parliamentary seal of approval before providing any aid.

European Union partners and the International Monetary Fund have been exasperated by a string of broken promises and weeks of wrangling over the terms of a 130 billion euro ($172 billion) bailout, with time running out to avoid a chaotic default.

Finance ministers of the 17-nation euro zone meeting in Brussels warned there would be no immediate green light for the rescue package and said Athens must prove itself first.

Jean-Claude Juncker, who chairs the Eurogroup, said the Greek parliament must ratify the package when it meets on Sunday and a further 325 million euros of spending reductions needed to be identified by next Wednesday, after which the currency bloc's finance ministers would meet again.

Thirdly, we would need to obtain strong political assurances from the leaders of the coalition parties on the implementation of the program, Juncker told a news conference after several hours of talks in Brussels. Those elements needs to be in place before we can take decisions.

Facing elections as soon as April, the leaders have been loath to accept the lenders' tough conditions, which are certain to be unpopular with voters.

Greek Finance Minister Evangelos Venizelos flew to Brussels after all-night talks involving Prime Minister Lucas Papademos, leaders of the three coalition parties and chief EU and IMF inspectors left one sensitive issue - pension cuts - unresolved.

Papademos' office had said a final 300 million-euro gap was bridged on Thursday in talks with the troika of the European Commission, the European Central Bank and the IMF, and endorsed by the party leaders.

The Greek government called on the coalition parties to support the deal when it comes to parliament, saying the Brussels meeting showed they were only half way there.

The first step is for parliament to approve it, showing political parties' commitment to the targets and the policies of the new economic program. It's time all of us to assume their responsibilities. We need action, not words, government spokesman Pantelis Kapsis said in a statement.

The euro rose on news of a deal, which appeared to remove - at least for now - the risk of a hard default by the euro zone's most indebted country, which faces a major bond redemption on March 20. The risk premium investors charge for holding Italian and Spanish bonds fell.

However, IMF spokesman Gerry Rice said talks would continue to finalize details, making clear no agreement had been concluded yet. He said managing director Christine Lagarde wanted assurances Greece would stick to the agreed policies whatever the outcome of looming elections.

Venizelos said Athens also had an outline deal with private creditors on a bond swap in which they would give up some 70 percent of the value of their Greek bond holdings, reducing Athens' 350 billion-euro debt pile by about 100 billion euros.

The draft agreement on private sector involvement to decrease the Greek debt burden is practically finalized, even if it will be formally approved as part of the overall package, I trust next week, EU Economic and Monetary Affairs Commissioner Olli Rehn told reporters.

ECB President Mario Draghi said he was quite confident that all the components of a Greek debt deal would fall into place and hinted the central bank could provide indirect help without breaching a treaty ban on financing governments.


The measures will mean a big fall in the living standards of many Greeks, now in the fifth year of a deep recession. Deputy Labor Minister Yannis Koutsoukos, a socialist, resigned over a package he said would be painful for working people.

Greece's two major labor unions called a 48-hour strike for Friday and Saturday against the reforms.

The painful measures that create misery for the youth, the unemployed and pensioners do not leave us much room, secretary general of the ADEDY union, Ilias Iliopoulos, told Reuters.

We won't accept them. There will be a social uprising.

Earlier, Panos Beglitis, spokesman for PASOK socialists who are in coalition along with the conservative New Democracy party and far-right LAOS, said the minimum wage would be cut by 22 percent as part of efforts to make the economy more competitive.

Asked how the differences over pension cuts had been resolved, a government official told Reuters: There will be cuts in other areas of public spending and we will see how we will minimize reductions in pensions.

New Democracy leader Antonis Samaras defended the resistance put up by Greek political parties to deeper austerity and called for a change in policy, in comments that may buttress European partners' doubts about his commitment to the program.

When your country is faltering and its social cohesion is at risk, can the only antidote to the crisis be even higher unemployment and two more years of recession? Samaras said in a televised address.

We should show the Europeans that what is happening in Greece will soon spread to the rest of Europe if we do not change the policy of an endless austerity.

But he also said the deal opened the way for a big cut in Greece's debt that would give us hope once again.


Greece has fallen deeper into recession since it received a first bailout in May 2010. Latest unemployment figures showed the jobless rate hit a record 20.9 percent in November, with youth unemployment a staggering 48 percent.

The sharper-than-forecast contraction has opened a funding gap of about 15 billion euros in the bailout package agreed last October to bring Greece's debt down to about 120 percent of gross domestic product from nearly 160 percent today.

Two sources said the government would promise spending cuts and tax rises worth 13 billion euros from 2012 to 2015, almost double the seven billion originally pledged.

To help fill the remaining gap, Athens has urged the ECB to forego profits on its Greek bond holdings in a move that could raise 12 billion euros or more.

The bank's 23-member Governing Council discussed the issue on Thursday. Draghi hinted there was a route to do that, while ruling out the ECB sustaining any loss.

Asked whether the ECB could give back profits on Greek bonds with a face value of about 50 billion euros which it bought at a discount in the market, Draghi indicated it would have to pass on the profits to governments when they were realized.

If the ECB distributes part of its profits to its member countries as part of the capital key, that's not monetary financing, he said.

(Additional reporting by Angeliki Koutantou, Lefteris Papadimas, David Stamp and Karolina Tagaris in Athens, Paul Carrel in Frankfurt, Robin Emmott, Julien Toyer, Luke Baker, Dan Flynn and Claire Davenport in Brussels and Lesley Wroughton in Washington; Writing by Paul Taylor and Mike Peacock)