BRUSSELS - Euro zone leaders have agreed on a bold rescue package for debt-stricken Greece and will give their financial rescue fund sweeping new powers to prevent market instability spreading through the region.

Greece's Prime Minister George Papandreou (L), European Council President Herman Van Rompuy (C) and European Commission President Jose Manuel Barroso (R) address a joint news conference at the end of an euro zone leaders crisis summit in Brussels July 21, 2011. [Photo/Agencies]

An emergency summit of leaders of the 17-nation currency area pledged on Thursday to conduct a second bailout of Greece with an extra 109 billion euros ($157 billion) of government money, plus a contribution by private sector bondholders estimated to total as much as 50 billion euros by mid-2014.

The leaders also made detailed provisions for limiting the damage if, as seems likely, credit rating agencies declare Greece to be in temporary default -- the first such event in the 12-year history of the euro.

The package pleased financial markets because it suggested that for the first time since the Greek debt crisis erupted early last year, the euro zone was taking a comprehensive, long-term approach to the problem, rather than simply lending Greece more money to avoid disaster in the near term.

"We have thus sent a clear signal to the markets by showing our determination to stem the crisis and turn the tide in Greece, thereby securing the future of the savings, pensions and jobs of our citizens all over Europe," Dutch Prime Minister Mark Rutte said after eight hours of talks.

French President Nicolas Sarkozy said measures agreed at the summit, the fifth this year on the crisis, would together reduce Greece's debt by 24 percentage points of gross domestic product from about 150 percent today.

Greek Prime Minister George Papandreou said the deal would cover his country's funding needs until 2020 and make its debt sustainable, but analysts questioned whether the reduction would be enough to avoid a restructuring in the medium term.

France's President Nicolas Sarkozy speaks during a news conference at the European Council building at the end of an euro zone leaders crisis summit in Brussels July 21, 2011. [Photo/Agencies]