'Great sacrifices to be made' as Greece thrown £95bn lifeline

The deal struck with the International Monetary Fund (IMF) for financial support for the struggling country over the next three years came after the Greek government agreed to an austerity package.

Prime minister George Papandreou's government will introduce harsh spending cuts all

through 2012. Greeks would be called upon tomake "great sacrifices" to avoid catastrophe, Mr Papandreou said in a live televised address.

These include ending Christmas and Easter bonus payments for those earning more than

€3,000 a month.

Retirement under 60 will be banned and the minimum contribution period to qualify for full pension will be gradually increased to 40 years from 37 years by 2015.

The main VAT rate is increased by 2 points to 23 per cent. It had already been raised to 21 percent from 19 per cent in March. Excise taxes on fuel, cigarettes and alcohol will rise by 10 per cent.

In the private sector, companies will be allowed to sack more than 2 per cent of their staff every month.

Under the new plan, Greece will narrow its budget shortfall from 13.6 per cent of gross domestic product last year to 8.1 per cent this year, 7.6 per cent in 2011 and 2.6 per cent in 2014.

Public debt is seen peaking at 149 per cent of GDP in 2013 and then falling to 144 per cent of GDP in 2014.

But with Greek unions planning a general strike on Wednesday against the newcuts, violent clashes broke out during anti-government

protests at Saturday's Labour Day rallies.

"I have done and will do everything not to let the country go bankrupt," Mr Papandreou said.

"We have convinced our partners that Greece's problem is not only ours. It concerns the functioning of the markets and the stability of the euro."

He said the measures would affect public sector pay and pensions, but not the private sector.

There will also be further hikes in consumer taxes and deep cuts in defence spending

and hospital procurement.

The loans from the eurozone member states, mainly Germany and France, and the IMF

are aimed at keeping the financially struggling country from defaulting on its debts and dealing a serious blow to the shared euro currency.

The head of the group, Luxembourg's Jean-Claude Juncker, said yesterday that the plan would still need approval by some countries' parliaments before debt-ridden Greece could receive the first funds. But he said the first loan money would

get to Greece before 19 May, so Greece could pay off on €8.5bn worth(7.5bn) of ten-year bonds maturing then.

Spain's financeminister, Elena Salgado, noted that Greece was a "special case" because the country had admitted faking its budget statistics in past years.

"The Greek case is a very special case," she said, "in the sense that many things have happened in Greece, of course the statistics, of course the deficit for a

very long period, so nothing compares to other countries."

Mr Juncker said the eurozone would contribute €80bn(69bn) to the package, with €30bn (26bn) of that to bemade available this year.

The Greek parliament is expected to approve the measures by Friday