Greece must make 'great sacrifices' for bail-out deal

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Riot police clash with May Day protesters in the centre of Athens

Greece said it had agreed a deal with the European Union and IMF to rescue the nation's embattled economy.

Prime Minister George Papandreou said that avoiding bankruptcy was the country's priority but that Greece would have to make "great sacrifices".

Details of the rescue deal, and the measures Greece has agreed to take in return, will be announced later.

There are fears that Greece's debt crisis could spread to other countries using the European single currency.

"Our national red line is to avoid bankruptcy," Mr Papandreou said, adding that "no-one could have imagined" the size of the debt that the previous government, which left office last year, had left behind.

"With our decision today our citizens will have to make big sacrifices," he said, describing public anger at the new wave of austerity cuts as "evident".

Police again clashed with demonstrators in Athens on Saturday during a protest against government measures.

European finance ministers will gather in Brussels and are expected to approve the bail-out.

Day of drama

In return the Greek government will unveil a fresh round of sweeping efficiencies, expected to include further tax rises and deeper cuts in pensions and public service pay.

ANALYSIS The BBC's Malcolm Brabant in Athens The scenes of intimidating May Day violence will have unsettled a few ministers' stomachs as they prepared for Sunday morning's crucial cabinet meeting. They will be anxious to know whether it was a foretaste of what is to come when the details of this, the third austerity programme in four months, are made public. Most of the destruction was carried out by a hardcore group of anarchists and not by the trades unionists. What will also make the politicians queasy is the way middle-class professionals turned on the former speaker of the Greek parliament when he got caught up in the trouble. He needed a riot police escort to make his getaway.

Finance Minister George Papaconstantinou will head to Brussels later for an extraordinary gathering of the 15 other eurozone finance ministers.

They could finally sign off a bail-out deal, which is designed to prevent Greece from defaulting on its enormous debt.

The eurozone countries are speeding up rescue efforts for Greece amid fears its debt crisis could pull down other members.

The EU is demanding austerity cuts in exchange for a huge bail-out. The rescue package is expected to amount to as much as 120bn euros (£100bn; $160bn) over three years.

The day of high drama behind closed doors comes a day after demonstrators clashed with police at the finance ministry in the capital.

A state TV truck was petrol-bombed and a prominent hotel was vandalised in the central Syntagma square.

Thousands of Greeks took part in May Day rallies called by trade unions and left-wing parties. Protesters hurled bottles and rocks and fought running battles with police in riot gear.

Huge public resistance

Angry protesters marched through Athens shouting: "Hands off our rights! IMF and EU Commission out!"

There were reports of similar scenes in the northern city of Thessaloniki, with youths attacking banks and business premises.

There is huge public resistance to the wage cuts, tax rises and pension reductions that are expected to be implemented.

Our correspondent says the unions hope the rallies will demonstrate to the government, the eurozone, the IMF and the international markets, that they can mobilise enough people to defeat the new austerity programme.

The BBC's Malcolm Brabant in Athens says the latest study of Greek attitudes shows most people are angry and dismayed about the bail-out, because they do not feel responsible for causing the crisis.

Most people on the streets want the government to make the rich pay for the deficit, rather than ordinary working citizens, he says.

Mr Papandreou says the loan is essential to save the country and protect its future, and has warned citizens to brace themselves for a period of hardship.

He has said he will not weaken despite opposition and the political cost of the unpopular measures.