Greek political leaders clinched a long-stalled deal on reforms and austerity measures to secure a second international bailout and avoid a chaotic default, hours before the country's financial backers began meeting in Brussels.

European Union partners and the International Monetary Fund have been exasperated by a string of broken promises and weeks of wrangling over sacrifices they demanded in return for a 130 billion euro ($172 billion) bailout, with time running out for Greece before a major March 20 bond redemption.

Finance Minister Evangelos Venizelos set off for Brussels without a complete deal after all-night talks involving leaders of the three Greek coalition parties and chief EU and IMF inspectors left one sensitive issue - pension cuts - unresolved.

The final 300 million euro gap was bridged on Thursday in talks with the troika of the European Commission, the European Central Bank and the IMF, and endorsed by party leaders.

"The consultations between the government and the troika on the issue which remained open for further discussion were successfully completed this morning. The political leaders agreed on the outcome of these talks," the office of Prime Minister Lucas Papademos said in a statement.

The euro and European stocks rose on news of the deal that appeared to remove - at least in the short term - the risk of a hard default by the euro zone's most indebted country, sending tremors around the global economy.

The risk premium investors charge for holding Italian, Spanish or Belgian bonds rather than safe-haven German Bunds fell back.

Venizelos, who was to present a commitment for 3.3 billion euros in budget cuts this year to euro zone finance ministers meeting at 1700 GMT, told reporters: "We need now the political endorsement of the Eurogroup for the final steps."

But several ministers arriving for the meeting warned there would not be a final decision at Thursday's meeting.

"Greece has to implement what it has not implemented from the first program before we can decide on a second," German Finance Minister Wolfgang Schaeuble said.

Venizelos said Athens also had an outline deal with private creditors on a bond swap in which they would give up some 70 percent of the value of their Greek bond holdings, reducing Athens' 350 billion euro debt pile by about 100 billion euros.

ECB President Mario Draghi said he was "quite confident" that all the components of a Greek debt deal would fall into place and hinted the central bank could provide indirect help without breaching a treaty ban on financing governments.

An IMF spokesman called the agreement "an important initial step" and said IMF managing director Christine Lagarde, in Brussels for the euro zone meeting, would seek assurances that the policies would remain consistent whatever the outcome of a general election likely in April.

The measures will mean a big fall in the living standards of many Greeks, now in the fifth year of a deep recession. Deputy Labor Minister Yannis Koutsoukos, a socialist, resigned over a package he said would be "painful for working people".

Greece's two major labor unions called a 48-hour strike for Friday and Saturday against the reforms.

"The painful measures that create misery for the youth, the unemployed and pensioners do not leave us much room," secretary general of the ADEDY union, Ilias Iliopoulos, told Reuters.

"We won't accept them. There will be a social uprising."

WRITTEN COMMITMENT SOUGHT

Panos Beglitis, spokesman for PASOK socialists who are in coalition along with the conservative New Democracy party and far-right LAOS, said the leaders had agreed to cut the minimum wage by 22 percent as part of efforts to make the economy more competitive. Plans to scrap holiday bonuses paid to private sector workers had been dropped.

Asked how the differences over pension cuts had been resolved, a government official told Reuters: "There will be cuts in other areas of public spending and we will see how we will minimize reductions in pensions."

International lenders have demanded that the party leaders commit themselves in writing to implement the full program of pay and pension cuts, structural and administrative reforms.

The leaders have been loath to accept the lenders' tough conditions, which are certain to be unpopular with voters.

"In these difficult hours we have to look after the ordinary people, the pensioners," New Democracy leader Antonis Samaras said. "I haven't got the right to not negotiate hard and I don't care what other people think about that. We have to make sure that people will suffer less."

Newspaper editorials criticized the harshness of the austerity measures demanded by foreign creditors, but said there was no other option but to give in and agree.

"The memorandum seems, and in fact is, heavy and unbearable for the majority of the Greek people but unfortunately it is the only choice so that the country is not led over the cliff," financial daily Imerisia said.

DEEPER RECESSION

Greece has fallen deeper into recession since it was rescued by a first bailout in May 2010. Latest unemployment figures showed the jobless rate hit a record 20.9 percent in November.

Industrial output fell 11.3 percent in December, in further proof of the deep economic malaise.

The sharper than forecast contraction has opened a funding gap of about 15 billion euros in the bailout package agreed last October to bring Greece's debt down to about 120 percent of gross domestic product from nearly 160 percent today.

Two sources said the government would promise spending cuts and tax rises worth 13 billion euros from 2012 to 2015, almost double the seven billion originally pledged.

Athens has urged the ECB to forego profits on its Greek bond holdings in a move that could raise 12 billion euros or more.

The bank's 23-member Governing Council discussed the issue on Thursday but Draghi declined to say how Greek bonds held by the ECB and euro area national central banks would be treated.

Asked whether the ECB could forego profits on Greek bonds with a face value of about 50 billion euros which it bought at a discount in the market, he indicated it would have to pass on the profits to governments when they were realized.

"If the ECB distributes part of its profits to its member countries as part of the capital key, that's not monetary financing," Draghi said.

Talks on the bond swap dragged on for weeks, complicated by the position of hedge funds and demands that public creditors also chip in. Officials and bankers say the deal cannot be finalized until the rest of the rescue package is nailed down.