NEW YORK (CNNMoney) -- European leaders announced a bold plan Thursday to help Greece get out of debt, and they pledged to take steps to contain the crisis and preserve the euro.
The overall plan is worth an estimated 109 billion euros, leaders of the European Union said at the end of a day-long summit in Brussels.
The aid package, which officials said will cover all of Greece's financing needs, involves lowering interest rates and extending the payback period on existing loans to Greece from the EU and International Monetary Fund.
The leaders also agreed to reduce interest rates and extend maturities on future loans made by the European Financial Stability Fund, an EU program set up last year to provide low-cost loans to troubled countries.
"We now have a program and package of decisions which creates a sustainable debt management path for Greece," said Greek President George Papandreou.
The announcement came amid concerns that unresolved fiscal problems in Greece, Portugal and Ireland could be spreading to core members of the European Union.
Investors in the bond market have driven borrowing costs for Italy and Spain to record highs in recent weeks on worries that EU officials would fail to contain the crisis in Greece.
On Thursday, markets in Europe and the United States were broadly higher.
"We think this is a good deal," said Carl Weinberg, an economist at High Frequency Economics. "It's the best they could have hoped for."
Weinberg said investors will likely cheer the plan when European markets open Friday morning, adding that the euro and prices for Greek bonds were already moving higher in extended trading.
"The markets are going to go crazy," he said.
Under the plan announced Thursday, private sector banks and investors will contribute an estimated 37 billion euros by voluntarily selecting from a menu of options.
It was not clear if the private sector involvement, which could result in losses for banks, would result in a so-called selective default by Greece.
The EU said it would provide "adequate resources" to stabilize Greek banks if necessary.
Germany had argued throughout recent negotiations that the private sector should bear some of the burden in bringing down Greece's unsustainable debt load.
The European Central Bank had opposed any plan that would have resulted in a default by Greece, saying it could no longer accept Greek bonds as collateral for loans to Greek banks.
"It was a meeting at a difficult time, and I'm happy with the outcome," said German Chancellor Angela Merkel.
Officials stressed that the decision to involve the private sector was not taken lightly and that no other nation would receive such consideration.
"This is a strong package," said Herman Von Rompuy, president of the European Council. He said the plan also contains "a series of measures to stop contagion."
The powers of the European Financial Stability Fund will be greatly expanded under the new plan.
To date, the bailout fund has disbursed 9.5 billion euros to Ireland and Portugal. Greece received billions in bailout money before the fund was set up last year.
The 440 billion euro fund will have the authority to buy sovereign debt in the secondary market, meaning it could absorb discounted government bonds from banks and investors.
It will also be able to provide lines of credit to shore up banks in troubled euro zone nations, even ones that do not have currently get help from the program, such as Italy and Spain.
Tu Packard, a senior economist at Moody's Analytics, said the plans should go a long way to make Greece's debt burden sustainable and contain the threat of a debt contagion.
"People are interested in a realistic path forward," she said. "And until now, there wasn't clarity." 
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