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What is the plan?

A sweeping European "Marshall Plan" will save Greece billions in loan repayments, lower its interest rates on rescue loans and extend maturities on its debt. It will also grant a European bailout fund new powers to help other indebted countries. The plan, negotiated by European Union leaders Thursday, is aimed at containing the continent's potentially crippling debt crisis.

The €109-billion package from the rescue fund and the IMF means loans will have a maturity of at least 15 years, up from 7.5 years, while the interest rate will fall to 3.5 per cent from 5.5 per cent. All told, the move will would cut the country's debt burden by about a quarter.

This is the second bailout for Greece. The first was in May, 2010.

What is the "EFSF" rescue fund?

The European Financial Stability Facility is a bailout fund, created by euro-area member states last year. It aims to promote financial stability in Europe by providing financial assistance to euro zone states in trouble.

The EFSF is getting more power to finance the buyback of bonds, extend credit lines or help in bank recapitalizations. It will also be able to buy bonds on secondary markets as needed. The new EFSF lending conditions agreed upon for Greece will also be applied to Portugal and Ireland.

What is the private sector doing?

For the first time, support is also coming from the private sector. Financial institutions that own Greek bonds will contribute €50-billion through 2014, and kick in €106-billion from 2011 to 2019.

The IMF, which agreed to support the package, says it is "encouraged" by the willingness of the private sector to voluntarily support Greece.

In terms of private-sector involvement, European leaders stressed that Greece is an "exceptional and unique" situation.

So will Greece default?

Repayment schedules have been changed and so have interest rates. The credit rating agencies haven't yet commented, but the changes will likely trigger a default or a selective default – making Greece the first country in the developed Western world to default in more than 60 years.

But any default will likely only be temporary, strategists said.

"While this new package of measures goes some way to ring-fencing Greece, Europe's problems are far from completely solved," said Benjamin Reitzes, BMO senior economist.

With files from wire services.

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