(Reuters) - Greek political leaders clinched a long-stalled deal on Thursday on harsh austerity measures and reforms required to secure a second international bailout in two years but the country's financial backers reacted skeptically.

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 arriving for talks in Brussels warned there would be no immediate green light for the rescue package and said Athens must prove itself first.

It's up to the Greek government to provide concrete actions through legislation and other actions to convince its European partners that a second program can be made to work, EU Economic and Monetary Affairs Commissioner Olli Rehn said.

German Finance Minister Wolfgang Schaeuble, whose country is Europe's biggest paymaster, told reporters: You don't need to wait around because there will be no decision (tonight).

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.

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 euro and European stocks rose briefly on the news, which appeared to remove - at least for now - the risk of a hard default by the euro zone's most indebted country, facing a major bond redemption deadline on March 20.

The risk premium investors charge for holding Italian, Spanish and Belgian bonds fell.

We need now the political endorsement of the Eurogroup for the final steps, Venizelos told reporters.

But several ministers arriving for the meeting made clear they wanted firmer guarantees and practical action first.

Greece has to implement what it has not implemented from the first program before we can decide on a second, Germany's Schaeuble said.

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.

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.

An IMF spokesman called the agreement an important initial step but said IMF managing director Christine Lagarde would seek assurances that Greece would stick to the agreed policies whatever the outcome of a general election likely in April.

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

Greece's two major labour 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.


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.

International lenders are demanding that the party leaders commit themselves in writing to implement the full program of pay and pension cuts, structural and administrative reforms.

The leaders have been loath to accept the lenders' tough conditions, which are certain to be unpopular with voters.

In these difficult hours we have to look after the ordinary people, the pensioners, New Democracy leader Antonis Samaras said.

I haven't got the right to not negotiate hard and I don't care what other people think about that. We have to make sure that people will suffer less.

Greek newspaper editorials criticized the harshness of the austerity measures demanded by foreign creditors, but said there was no option but to give in and agree.

The memorandum seems, and in fact is, heavy and unbearable for the majority of the Greek people but unfortunately it is the only choice so that the country is not led over the cliff, financial daily Imerisia said.


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.

Industrial output fell 11.3 percent in December, in further proof of the deep economic malaise.

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.

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 but Draghi, who also attended the Brussels meeting, declined to say how Greek bonds held by the ECB and euro area national central banks would be treated.

Asked whether the ECB could forego profits on Greek bonds with a face value of about 50 billion euros which it bought at a discount in the market, he 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, Draghi said.

(Additional reporting by Lefteris Papadimas and Karolina Tagaris in Athens, Paul Carrel in Frankfurt, Jan Strupczewski and Claire Davenport in Brussels and Lesley Wroughton in Washington; Writing by Paul Taylor.)