Europe Launches a Massive Greek Bailout

BRUSSELS—Euro-zone leaders agreed Thursday on a new €100 billion ($144 billion) bailout for Greece and new steps to prevent its debt crisis from metastasizing across the Continent—in a plan expected to trigger the first debt default by a nation using the common currency.

The meeting also produced a stark and open-ended declaration: The wider euro zone is committed to financing countries that take bailouts—thus far, Greece, Ireland and Portugal—for as along as it takes them to regain access to private lenders.

The move is a bold bid by Europe's leaders to corral an 18-month-old debt crisis that is veering dangerously out of control. Markets stopped lending to Greece, then Ireland, then Portugal. Fearful that policy makers have no concrete strategy for shoring up the larger economies of Spain and Italy, investors have lately soured on them as well. After months of dithering, European leaders resolved that they had to stop the bleeding.

Still, it remains to be seen whether the tourniquet will hold. Even after the new plan, Greece will have a staggering load of debt.

Thursday's agreement was the fruit of several concessions. European Central Bank Jean-Claude Trichet lost a fight to prevent default. German Chancellor Angela Merkel pried open her reluctant nation's pocketbook to write another check and be on the hook for still more.

French President Nicolas Sarkozy, though he lost a bid to tax banks to pay for the bailout, may have come out the best by urging Ms. Merkel to a more proactive approach to the debt crisis.

In a declaration crafted here after hours of haggling, and a whirlwind trip Wednesday to Berlin by the French president, the leaders put forward billions more in new loans to Greece. But they extracted a price: Greece's private-sector creditors will accept a bond exchange that gives them less than originally promised.

The euro zone had long insisted that none of its 17 members could contemplate not repaying their debt, and the European Central Bank vigorously fought a default to the very end. Mr. Trichet joined Ms. Merkel and Mr. Sarkozy at their meeting in Berlin on Wednesday to press his case once more. But Greece was reeling under its huge burden, and its woes were threatening to engulf other countries.

To push back against that contagion, the euro zone also agreed Thursday to a wide expansion of its €440 billion bailout fund. That vehicle, once restricted to lending to countries near the brink of collapse, will now be able to buy euro-zone bonds on secondary markets to move prices and lend directly to countries even before they lose access to private funding. That could even include lending money to finance bank recapitalizations.

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