BRUSSELS (AP) — Finance ministers from the 16 countries that use the euro agreed yesterday on a financial rescue for Greece that will loan the struggling country 110 billion euros ($146 billion) over three years to keep it from defaulting on its debts.

The loan package is also aimed at keeping Greece's debt crisis from spreading to other financially weak countries such as Spain and Portugal just as Europe is struggling out of a painful recession.

In return, Greece had to agree to an austerity programme that will impose painful spending cuts and tax increases on its people for years.

The plan will still need approval by some countries' parliaments. But the head of the eurogroup, Luxembourg's Jean-Claude Juncker, said Greece will get the first funds by May 19, when Athens has 8.5 billion euros worth of a 10-year bond maturing.

Fears that the money might be held up by objections in powerful eurozone member Germany — where the Greek bailout is not popular — sent shudders through bond and stock markets last week.

But European Union President Herman Van Rompuy called for a special summit of the euro countries on May 7 to "conclude the whole process" once national parliaments deal with the issue "in the next few days".

Juncker said the eurozone would contribute 80 billion euros to the package, with 30 billion euros of that to be made available this year. The rest of the money would come from the Washington, DC-based IMF.

EU Monetary Affairs Commissioner Ollie Rehn said the loans from other eurozone countries to Greece would carry an interest rate of "around five percent."

Because the interest rate is higher than the one those countries face themselves on the market, they could make money out of the rescue package. But the rate is significantly lower than Greece would face if it tried to borrow on the international market, where it has seen its borrowing costs spiral because of investor fears it would default. Athens has said the plan will allow it breathing space to implement harsh new austerity measures it announced earlier yesterday to bring its economy into order.

"This mechanism is an enormous step forward for Europe and of course for Greece," Greek Finance Minister George Papaconstantinou said.

The new measures he announced earlier in Athens include cuts in civil servants' salaries and pensions, and tax increases that aim to cut the deficit to below three percent of gross domestic product, within EU limits, by 2014. The deficit currently stands at 13.6 percent.

"We are called on today to make a basic choice. The choice is between collapse or salvation," Papaconstantinou said before flying to Brussels.

The IMF and EU said the bailout and austerity programme were tough and would help Greece out of its troubles, but warned it would take years.

"The steps being taken, while difficult, are necessary to restore confidence in the Greek economy and to secure a better future for the Greek people," said a joint statement by Rehn and IMF head Dominique Strauss-Kahn. "We are confident that Greece will rise to the challenge and succeed."

They warned that that given the serious situation Greece was in, the rescue plan "cannot be expected to turn the economy around overnight. A sustained, multi-year effort will be needed to bring down Greece's debt and spur competitiveness."

Many economists say that while a bailout would keep Greece from defaulting in the next year or two, its meagre prospects for economic growth mean it will have difficulty paying off its debt pile.