After weeks of wrangling over whether and how to help Greece out of its financial crisis, the leaders of eurozone nations have reached a deal to rescue the country from its debt crisis.
The 16 eurozone countries pledged to support Greece by providing a combination of International Monetary Fund (IMF) credit and bilateral loans on market conditions as a "last resort" if their partner can no longer get credits from the capital markets and an insolvency is imminent.
The agreement, which came at a meeting of the heads of state and government of the eurozone countries on the first day of a two-day European Union summit in Brussels yesterday, is based on a compromise plan put forward by German Chancellor Angela Merkel and French President Nicolas Sarkozy.
Merkel vehemently opposed a direct EU financial support for Greece and pressed for involving the IMF in a bailout.
Germany is concerned that an EU bailout could be challenged at the country's Federal Constitutional Court because the EU treaty bars its members from taking over each other's debts.
Moreover, a direct EU help for Greece would set a bad precedent for other eurozone nations with huge debts such as Portugal, Ireland, Spain and Italy.
A crisis mechanism to deal with the situation in Greece has been put in place, President of the European Council Herman Van Rompuy told reporters after the eurozone leaders' meeting.
The agreement among the eurozone nations ended weeks of speculations about Greece and opened the way for obtaining credits, he said.
The eurozone leaders said in a joint statement that a majority of the nations which have the euro as the common currency will contribute the largest part of the bailout funds for Greece in the event of an imminent bankruptcy.
Each eurozone nation will contribute an amount proportional to its gross domestic product and is population, the statement said.
The European Commission and the European Central Bank will be responsible for monitoring Greece's compliance with the conditions attached to the different loans it receives, the statement said.
The agreement also provides for strengthening the euro zone stability pact through fiscal supervision of member countries and levying of fines for non-compliance with the conditions of the pact in order to prevent similar crisis in the future.
The President of the European Commission, Jose Manuel Barroso, welcomed the agreement as a "right decision to deal with an exceptional problem which could have had great implications for the stability of the euro."
Sarkozy said the deal was made possible by the compromise plan he had agreed with Chancellor ahead of Thursday's meeting. "What would have happened if there was no agreement between France and Germany,"? he remarked at a news conference.
Press reports said the total funding of the bailout plan may involve more than 20 billion euros and a large part of it would come from bilateral contributions.
Europe's two largest economies Germany and France are expected to shoulder a major part of the burden.
Greece has a staggering debt of more than 300 billion euros and the country needs up to 25 billion euros in the coming weeks to service its debts and to meet other obligations.
The eurozone leaders are hoping that their promise of financial support would make it possible for Greece to get credits from capital markets at more favourable conditions than at present and thereby eliminate the need for their support.
Welcoming the agreement, Greek Prime Minister George Papandreou said his country will overcome the crisis without the promised support from its partners.
He is hoping that the decision in Brussels would reduce the interest rates and thereby make credits from the capital markets cheaper and would make it easier to get credits.