WASHINGTON (Reuters) - The International Monetary Fund on Sunday approved a 30 billion euro ($40 billion) rescue loan for debt-stricken Greece, with 5.5 billion euros being disbursed immediately to stem a crisis that has begun to threaten other euro zone members.
The IMF's three-year loan program is part of a European-led 110 billion euro ($147 billion) financing plan for Greece aimed at averting the euro zone's first sovereign debt default.
Worries that Greece's problems could spread to other countries have undermined financial markets, which have proven unusually volatile in recent days. Analysts have identified Portugal, Spain and Ireland as countries that could follow in Greece's footsteps and be forced to seek help.
"Today's strong action by the IMF to support Greece will contribute to the broad international effort underway to help bring stability to the euro area and secure recovery in the global economy," IMF Managing Director Dominique Strauss-Kahn said in a statement.
The combined Greek bailout package is the biggest in history. In return for the aid, Greece has had to commit to a painful package of spending cuts and revenue increases that has led to deadly rioting.
Greece has a debt burden of more than 115 percent of gross domestic product and needed assistance to make debt payments falling due on May 19.
"While short-run output will necessarily contract as the economy adjusts, structural reforms should help to restore external competitiveness and, together with improved market confidence, set the economy on a recovery path," said John Lipsky, the IMF's No. 2 official.
In Brussels on Sunday, European finance ministers pressed for special measures before financial markets open on Monday to stop Greece's debt crisis from spreading, promising to do everything they can to defend the euro from the "wolfpack" of financial markets.
The European Commission will propose to ministers a mechanism intended to provide a multibillion-euro safety net for other euro zone countries.
U.S. President Barack Obama and German Chancellor Angela Merkel talked on Sunday about European financial markets and discussed the importance of European Union members taking steps to build confidence in markets, the White House said.
White House spokesman Bill Burton said the phone conversation was part of Obama's "ongoing engagement with European leaders with regard to the economic situation there.