The Royal Opera House is to close in its current form next January, as part of a radical plan to put the financially troubled Covent Garden institution back on an even keel.
As part of the package, staff have been told they must accept renegotiated working conditions and a substantially reduced workforce. It is thought that they will face mass redundancy unless the programme is agreed.
Subject to successful negotiations on working conditions and the size of the staff, the house would reopen in December 1999.
On the opening, the number of performances would be reduced by a third, with 120 ballet and 100 opera performances in the first full season.
The Opera House chairman, Sir Colin Southgate, said: "The days for fudging are long passed. The board is sad at the pain this will cause to our workforce but only a total restructuring will achieve real results."
Sir Colin emphasised that radical action had been necessary to ensure the Opera House's continued existence.
The company's deficit already stands at £13 million and by the end of March 2000 was projected to be £25 million, although sales of retail outlets in the newly redeveloped building in Covent Garden will recoup £15 million, bringing the deficit down to £10 million.
Sir Colin said the rescue package was reliant on three basic requirements: the temporary shutdown and subsequent scaling down of performances, agreement on more flexible working patterns, and additional financial assistance from the government via the British Arts Council.
Mr Gerry Morrissey, assistant general secretary of staff union, Bectu, described the announcement as "outrageous". He said: "It compounds the previous mismanagement that has taken place as once again, the people who work so hard to put on some of the highest quality shows in the world are being sacrificed to save the suits.
"What is the logic of building the finest opera house in Europe and then closing it for a large part of the year?" But Mr Gerry Robinson, the Arts Council chairman, welcomed the news. He said: "We welcome the Royal Opera House's strategy for safeguarding the future of opera and ballet within a new, state-of-the-art Covent Garden theatre."