Greece in deal with EU/IMF on austerity plan

Greek Prime Minister George Papandreou promised to push through radical economic reform after his new finance minister clinched agreement with EU and IMF inspectors on extra tax rises and spending cuts to plug a 3.8 billion euro funding gap.

Greece needs 12 billion euros in European and IMF aid to avoid a default on its debt mountain in mid-July that could spread contagion across the euro currency area and send shock waves around the world economy.

Five-year credit default swaps on Greek government debt rose 138 basis points to 2,025 bps on Thursday, according to data monitor Markit, implying a more than 80 percent probability of default over that period.

The euro rebounded against the dollar and U.S. stocks pared losses on news of the agreement in Athens.