ATHENS, Greece - Greece on Friday launched its official offer for a massive bond swap designed to knock $142 billion off its debt held by banks and other private investors.

The Finance Ministry issued the formal offer to banks and other investment funds under which creditors are called on to accept a loss of more than half the face value of the bonds they hold in return for new bonds with longer maturities.

Success of the deal - dubbed the Private Sector Involvement - depends on a high level of participation. It is an integral part of the second international bailout for Greece, under which the country will receive $174 billion in rescue loans in return for further harsh austerity measures.

The debt relief deal will force private bondholders to exchange their Greek government bonds with new ones with a 53.5 percent lower face value, longer maturities of up to 30 years and lower interest rates - an annual 2 percent by 2015, 3 percent to 2021 and 4.3 percent after that.

Private bondholders will also get a €30 billion payment as part of the deal - which is to be paid from the €130 billion bailout.

The formal announcement followed a Cabinet meeting which discussed implementation of the debt-crippled country's new austerity program.

"We have made a titanic effort - and I believe titanic is the right word - to complete prior actions required for approval of financial support for the country and the process of the Private Sector Involvement which will be officially launched today," Prime Minister Lucas Papademos told ministers.

On Thursday, Parliament approved an emergency law on the debt writedown, decided by the 17-member eurozone this week together with the $173 billion bailout.

Charles Dallara, a senior banker who led the exhaustive bond-swap negotiations with Greece, said the deal would give Greece valuable time to implement long-term reforms needed to stabilize its crisis-hit economy.

"It involves an unprecedented debt reduction and debt exchange, reducing Greece's debt by over $100 billion, approximately 50 percent of Greece's GDP," Dallara said in a statement to a meeting of the Group of 20 finance ministers and central bank governors met in Mexico City.

"Coupled with concessional interest rates involving savings of up to $90 billion and maturities on restructured debt of up to 30 years, this agreement with private creditors should give Greece substantial breathing space to implement the challenging economic reform program it has embarked upon with the strong support of the euro area."

Without either deal, the country would default on its debts next month and would likely be forced to abandon the euro currency, a move that could send shockwaves throughout Europe and the world's financial markets.

Greece has been surviving since May 2010 on an initial $110 billion package of international rescue loans from other eurozone countries and the International Monetary Fund, of which it has received $73 billion.

Papademos promised to push through emergency legislation needed for the new austerity measures by Feb. 29 - in time for a European Union leaders' summit the following day.

Meanwhile, Greek unions have joined an Europe-wide protest campaign against economic austerity, also scheduled for Feb. 29, planning a three-hour work stoppage and march on Parliament.

Estonia has become the latest eurozone country to endorse the new rescue deal for Greece, its lawmakers voting 56-32 in favor of the additional funding.

The German Parliament's lower house votes on the package Monday.

German Finance Minister Wolfgang Schaeuble wrote to lawmakers, urging them to support the new Greek rescue package and cautioning: "It also may not be the last time that the German Bundestag has to deal with financial aid for Greece."