Greek Political Leaders Agree On Bailout Reforms

Greek leaders clinched a long-stalled deal on reforms and austerity measures needed to secure a bailout and avoid a messy default just hours before the country's financial backers were to meet in Brussels on Thursday.

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The euro

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[EUR=X  Loading...      ()   ] rose following the news, though European shares pared their gains after Wall Street shrugged off the Greek deal.

Athens' partners in the European Union and the International Monetary Fund have been exasperated by a lack of agreement on the sacrifices they demanded in return for a 130 billion euro ($172 billion) bailout, with time running out for Greece before a major March 20 bond redemption.

Finance Minister Evangelos Venizelos set off for Brussels without a complete deal after all-night talks with leaders of the three Greek coalition parties and chief EU and IMF inspectors left one sensitive issue—pension cuts—unresolved.

But following further negotiation on Thursday, two government sources said an overall agreement had been reached.

"A few minutes ago, I got a call from the Prime Minister of Greece saying that an agreement had been reached and has been endorsed by the major parties," European Central Bank President Mario Draghi told a news conference in Frankfurt in the first official confirmation.

The euro and European stocks strengthened on news of the breakthrough, which raised prospects of averting a chaotic hard default by the euro zone's most indebted country within weeks, that could send tremors around the global economy.

The risk premium investors charge for holding Italian and Spanish bonds rather than safe-haven German Bunds fell back.

Euro zone officials say the full package must be agreed with Greece and approved by the EU, IMF and European Central Bank by February 15 so legal paperwork can be completed in time to avoid a chaotic default that may threaten the global economic recovery.

"The financial survival of the country in the coming years depends on the new program...It is a time of responsibility for everyone," Venizelos said.

Greece's two major labor unions called a 48-hour strike for Friday and Saturday against the reforms that the party chiefs managed to agree on.

"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."

Venizelos should now be able to present to fellow euro zone finance ministers a fully-fledged new bailout plan, including a commitment for 3.3 billion euros in budget cuts this year, when they meet at 1700 GMT.

Before then, all eyes will be on what the ECB is willing to do to help Greece at its monthly policy meeting.