Greece says it has agreed a deal with the European Union and IMF to rescue the nation's embattled economy.
Prime Minister George Papandreou said Greece would have to make "great sacrifices" to avoid bankruptcy.
The value of the rescue deal will be announced later. Details of the austerity cuts agreed in return for loans have been revealed.
There are fears that the Greek debt crisis could spread to other countries using the European single currency.
On Saturday, police again clashed with demonstrators in Athens who were protesting against government measures.
'Evident' anger
European finance ministers will gather in Brussels later on Sunday and are expected to approve the bail-out, which is which is designed to prevent Greece from defaulting on its enormous debt.
The rescue package is expected to amount to as much as 120bn euros (£100bn; $160bn) over three years.
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.
Mr Papandreou told a televised cabinet meeting that active and retired public sector workers would bear the brunt of the new wave of budget cuts.
"With our decision today our citizens will have to make great sacrifices," he said, describing public anger at the new wave of cutbacks as "evident".
"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.
'No easy path'
The austerity cuts aim to achieve fresh budget cuts of 30bn euros over three years - with the goal of cutting Greece's public deficit to less than 3% of GDP by 2014. It currently stands at 13.6%.
Measures include:
- Scrapping bonus payments for public sector workers
- Capping annual holiday bonuses and axing them for higher earners
- Banning increases in public sector salaries and pensions for at least three years
- Increasing VAT from 21% to 23%
- Raising taxes on fuel, alcohol and tobacco taxes by 10%
- Taxing illegal construction
Finance Minister George Papaconstantinou said Greece had been called on to make a "basic choice between collapse or salvation".
New emergency legislation authorising the cuts and tax rises is now being drafted and is due to be put before parliament for approval by the end of the week.
European Commission President Jose Manuel Barroso said Greece had committed to "a difficult but necessary reform process" and that the measures promised were "solid and credible".
This rescue would "be decisive to help Greece bring its economy back on track and preserve the stability of the Euro area", he added.
Finance Minister George Papaconstantinou will head to Brussels later for an special gathering of the 15 other eurozone finance ministers.
The eurozone countries are speeding up rescue efforts for Greece amid fears its debt crisis could pull down other members - with particular concerns having been raised about Portugal, Spain and Ireland.
German Chancellor Angela Merkel said the cuts imposed on Greece in return for the rescue would spur other troubled eurozone to do all they could to avoid the same fate.
"These countries can see that the path taken by Greece with the IMF is not an easy one. As a result they will do all they can to avoid this themselves," Mrs Merkel told the Bild am Sonntag newspaper.
During Saturday's clashes in Athens a state TV truck was petrol-bombed and a prominent hotel was vandalised. Protesters fought running battles with police in riot gear.
Thousands of Greeks took part in May Day rallies called by trade unions and left-wing parties.
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.
The economy is still deep in recession and on Sunday the government forecast that GDP would fall by 4% in 2010.
The country's national debt - currently at about 115% of GDP - would rise to 149% by 2013 before falling, it added.
ANALYSIS
The BBC's Malcolm Brabant in Athens
George Papandreou's cabinet looked crestfallen as he called on Greece to make deep sacrifices to save the country from bankruptcy.
As Socialists they have been forced to swallow their political rhetoric and go back on election promises made only six months ago, that they would bring new prosperity to Greece.
The Prime Minister warned that civil servants past and present would continue to bear the brunt of the austerity measures.
BBC News
