Eurozone finance ministers will meet in Brussels today to activate a financial assistance package for Greece.

Ministers from the 16 member countries of the eurozone will meet to approve a joint finance facility with the International Monetary Fund worth €45 billion this year, out of a total of €120 billion for the three years up to 2012.

Greece will have access to the first tranche of funds from the IMF from tomorrow morning, according to European Commission officials. Athens needs to refinance €8.5bn of bonds that mature on 19 May. The Greek government will use the IMF and eurozone funds rather than go to the financial markets because it cannot afford to pay the sky-high interest rates that markets are demanding to cut its deficit.

Yields on Greek government debt have soared to around 23 per cent because investors fear that the country could go into default.

A Commission spokesman said that eurozone finance ministers would decide whether to activate a package of financial assistance based on recommendations by officials from the IMF, the European Central Bank and the European Commission, who have been in Athens to discuss Greece’s public finances.

The Greek government has agreed a further package of austerity measures to cut around €24bn from spending next year as part of a pledge to cut the country’s budget deficit by 10 percentage points by 2013.

Greece’s deficit currently stands at more than 13 per cent of gross domestic product.

Facing a dire choice of additional pain or bankruptcy, Greece heralded drastic new cuts and tax increases to win rescue loans from its European partners and the International Monetary Fund – and avoid a disastrous default on government debt.

Prime Minister George Papandreou said on Friday that cuts are inevitable if the country is to keep afloat.

“The measures we must take, which are economic measures, are necessary for the protection of our country – for our survival, for our future – so we can stand firmly on our feet,” Papandreou said in Parliament.

Greece, the EU and the IMF are expected to complete talks this weekend over what extra steps Athens must take as a condition of the rescue, which would provide €45 billion in loans this year and up to a reported €120 billion over three years.

Papandreou is widely expected to detail the cuts today, the day after a mass protest rally planned by the country’s biggest labour unions to mark May Day. Officials briefed on the negotiations say the measures will include a further slash in civil service pay, as well as state and private sector pensions, and a new hike in indirect taxes, including a two percentage point increase in sales tax.

“It is a patriotic duty to undertake this, with whatever political cost, which is tiny faced with the national cost of inaction... and indecision,” Papandreou said.

Luxembourg’s Jean-Claude Juncker, the head of the Eurozone finance ministers, called a meeting of the 16 eurozone finance ministers in Brussels this afternoon to review the rescue. Juncker said today’s session is designed to assess the latest package of emergency measures Papandreou is likely to announce today.

And in Italy on Friday, Premier Silvio Berlusconi said his government was preparing a decree to formalise its expected €5.5 billion contribution to the EU rescue loan.

Once an agreement is in place, Germany – which, as the largest EU contributor, has insisted on strict conditions for releasing the aid – is expected to quickly push the issue through Parliament so that Greece can get the money to pay debts coming due on 19 May.

German Finance Ministry spokesman Michael Offer said that, once the plan was announced, Germany would review it and consult with eurozone finance ministers in a conference call. Berlin has stressed it needs to review the plan before it can pass legislation to free its €8.4 ($11.1) billion share of the loans.

Greek Finance Minister George Papaconstantinou said an agreement was “very close” and that once negotiations were concluded, there would be “a simultaneous announcement of the basic elements of this programme as well as all the financing mechanism so that Greece has no immediate borrowing problems – and I am sure it will not – but more importantly, so we can carry out the major reforms without the... angst of the daily market fluctuations.”

Speaking at an economy conference, Papaconstantinou said the three-year programme was “the greatest fiscal reform that has ever taken place in Greece. It is a difficult adjustment that will call on everyone to undertake a great effort.”

He insisted that the Greek banking system would be “shielded against any attack” in the reforms.

A default would be a serious blow to the euro currency and could hit Greek and European banks that invested in Greek government bonds. The bailout is designed to prevent this and to keep the Greek crisis from spreading to other countries that use the euro.

Greece spent freely for years and ran up debt equal to 115 per cent of gross domestic product. It has been effectively shut out of bond markets to refinance its debt pile because investors fear default and are demanding high rates of interest the government says it cannot pay.

Signs that the help will soon be approved have calmed markets, which previously pushed Greece’s cost of borrowing to untenably high levels, as EU and German officials showed little urgency in addressing the problem.

On Friday the interest rate gap, or spread, between Greek 10-year bonds and their benchmark German equivalent narrowed to 6.20 percentage points, from a staggering 10 points on Wednesday.

But At hens was in for more bad news as credit agency Moody’s Investor Services downgraded the debt rating of nine Greek banks: National Bank of Greece, EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank, Emporiki Bank of Greece, Agricultural Bank of Greece, General Bank of Greece, Marfin Egnatia Bank and Attica Bank.

Moody’s said the banks might face further downgrades – a move that would come alongside Moody’s ongoing review of the country’s sovereign debt rating.

On Thursday, the agency confirmed that it is awaiting details of an EU-IMF rescue package before a possible revision of Greece’s credit rating, but that a “multi-notch downgrade” remained likely.

Earlier this week, another ratings agency, Standard & Poor’s, downgraded Greek bonds to junk status.

Citigroup chief economist Willem Buiter said the rescue cash would give Greece breathing space, but an eventual debt restructuring – a lengthening of repayment deadlines and cuts in the capital to be returned – appeared inevitable.

“In my view, sooner or later there will have to be a restructuring of the public debt,” he told a conference in Athens. “It won’t happen here anytime soon now, thanks to the three years of financial support that have been added... so the immediacy of the solvency crisis has been kicked over a three-year horizon.”

He said the problems would probably last for a decade.

“In Greece there are two options, pain or default, or what I call a slight combination of the two, pain and restructuring with external support from your European partners and your friends in Washington,” Buiter said.

Citigroup’s Buiter castigated what he called “dithering and shameful brinkmanship” by Greece’s EU allies which, if repeated, could lead to “a nasty, unintended default.”

“But if we use collective brains, we won’t,” he added, expressing optimism that the 16-member eurozone will weather the storm.

“I don’t think that any of this threatens the eurozone, except possibly the risk of what I call a soft bailout, that conditionality is not enforced and the Germanies of this world after five or 10 years of filling a black hole – in Greece and possibly elsewhere as well – will walk out in disgust,” Buiter said. “I don’t think that is going to happen.”