(Reuters) – Euro zone finance ministers approved a giant 30-billion-euro ($40 billion) emergency aid mechanism for debt-plagued Greece on Sunday but stressed Athens had not requested the plan be activated yet.

Together with at least 10 billion euros expected from the International Monetary Fund in the first year, it could add up to the biggest multilateral financial rescue ever attempted.

“With today’s decision, Europe sends a very clear message that no one, any longer, can play with our common currency, no one can play with our common fate,” Greece’s Prime Minister George Papandreou said in a statement.

In a rare weekend telephone conference, finance ministers of the 16 nations that share the single European currency backed a detailed plan for Greece to borrow from euro-zone governments and the IMF at significantly below market rates.

IMF chief, Dominique Strauss-Kahn, said the IMF was ready to provide help, possibly through a multi-year standby loan arrangement, and is set to hold talks with Greek, EU and European Central Bank officials in Brussels on April 12.

“The IMF stands ready to join the effort, including through a multi-year stand-by arrangement, to the extent needed and requested by the Greek authorities,” he said in a statement.

He welcomed the euro zone’s financial package for Greece, calling it an important step that will also help safeguard financial stability in the euro area as a whole.

A Greek Finance Ministry official said it was logical to expect the package would amount to significantly more than 40 billion euros over 3 years. Earlier in the day, he had said it could hit 80 billion euros, but later corrected this.

If Greece obtains aid, the package could dwarf past IMF bailouts for Mexico and Argentina. The largest IMF commitment ever made to a country was the $47 billion arrangement for Mexico approved in April 2009 under a so-called flexible credit line; Mexico has not drawn from the credit line.

The firepower in the Greek package, even if held in reserve, may reassure investors and make them more willing to continue buying Greek bonds. But big uncertainties remain over the longer-term prospects for reducing Greece’s debt mountain, which have dented confidence in the euro.

The Greek official said the government would decide within a few days whether to ask for the aid, depending on whether market interest rates subside.

European Economic and Monetary Affairs Commissioner Olli Rehn said the 3-year euro zone loans would carry an interest rate of about 5 percent — well below current market rates of about 7.3 percent. That responds to Greece’s appeal to be able to borrow at rates closer to its peers in the currency area.

Assistance for subsequent years would be decided later.

“If the mechanism had to be activated, it would not be a violation of the no-bailout clause (in the European Union treaty) since the loans are repayable and contain no element of subsidy,” Jean-Claude Juncker, chairman of the Eurogroup of finance ministers, told a Brussels news conference.

A German government official welcomed the agreement, which he said should enable Greece to do its fiscal “homework” on deficit reduction without market distraction.

“It should contribute to a calming of the markets so that Greece can take care of its homework in peace and quiet.”

Rehn said all euro zone countries would pay proportionately to their share in the ECB’s capital, making Germany by far the biggest lender, followed by France and Italy.

Talks on coordination with the IMF will begin on Monday, he said.

“GUN ON THE TABLE”

The agreement was urgently awaited because Athens is due to auction short-term debt on Tuesday after investors last week sent Greek borrowing costs spiraling due to fears of a possible default and doubts over the EU safety net.

Papandreou made clear in a newspaper interview that detailing the rescue plan was a last-ditch effort to deter speculation against his country.

“The question remains whether this mechanism will convince markets just like a gun on the table. If it does not convince them, it is a mechanism that it is there to be used,” he told the Sunday edition of To Vima.

But Finance Minister George Papaconstantinou told reporters after Sunday’s decision that Greece hoped to be able to continue to borrow smoothly on financial markets.

Skepticism over Greece’s ability to manage its 300 billion euro ($400 billion) debt pile, more than its 240 billion euro annual economic output, grew last week. Investors dumped Greek stocks and bonds, and ratings agency Fitch downgraded Athens’s debt by two notches on Friday.

Fitch lowered Greece’s credit rating to BBB-, the lowest investment grade just above junk, saying a deepening recession and rising debt service costs would make it harder for Athens to meet its budget deficit reduction target.

The government has imposed tough austerity measures to meet a pledge to cut the public deficit by four percentage points of gross domestic product to 8.7 percent this year.

Juncker said data provided by Greece showed the fiscal consolidation programme were encouraging and showed Athens was on track to reach this year’s target. Rehn said Greece would not be asked for further cuts this year, but would have to take more deficit-cutting steps, notably on pensions, in following years.

Strong public opposition to any bailout for Greece in Germany, Europe’s biggest economy and main paymaster, had fueled market doubts about the availability of any rescue.

Germany, the Netherlands and Austria argued that any emergency loans should be at current market rates to avoid moral hazard that would ensue if profligate countries were rewarded.

However, euro zone officials broke the deadlock on Friday, based on the IMF pricing formula with adjustments, Rehn said.

The euro, which has been dragged down by concerns over Greece and possible contagion with other weak Mediterranean euro zone economies, rebounded slightly on news of Friday’s technical agreement among deputy finance ministers and central bankers.

The risk premium that investors charge to hold Greek debt rather than benchmark 10-year German bonds narrowed to just over 400 basis points after hitting a record 454 on Thursday.

However, any durable reduction in the spread will depend on the credibility of the EU rescue plan and markets’ assessment of how likely it is to be invoked.

Greece needs to borrow about 11 billion euros by the end of May to refinance maturing debt and interest charges. Its overall 2010 borrowing requirement is 53 billion euros.

(Additional reporting by Marcin Grajewski in Brussels, Erik Kirschbaum in Berlin, Michele Kambas in Nicosia, Lesley Wroughton in Washington and Ingrid Melander in Athens; writing by Paul Taylor; editing by Michael Roddy and Gunna Dickson)