Greek prime minister George Papandreou said on May 2 2010 that his government had reached an agreement with the European Union and the International Monetary Fund (IMF) on a multi-billion-euro financial bailout package, and he added that "major sacrifices" would have to be made. Papandreou said that the package was necessary for Greece to avoid bankruptcy, and the country must be willing to make major sacrifices. "We approve an agreement on an unprecedented bailout in exchange for Greeks' unprecedented efforts. Our citizens have to make big sacrifices," Papandreou said. The reforms were inevitable, according to Papandreou, who said that "the alternative would be a catastrophe." Avoiding bankruptcy was the country's priority but Greece would have to make "great sacrifices". Greece is to implement further budget cuts of 30 billion euro over the next three years to achieve a budget deficit of less than three per cent of GDP by 2014. The EC, the European Central Bank and the IMF have been involved in negotiating the programme for the past 10 days. "Our national red line is to avoid bankruptcy," the BBC quoted Papandreou as saying, adding that "no-one could have imagined" the size of the debt that the previous government, which left office in 2009, had left behind. The measures that Greece is to implement are to 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 value-added tax (VAT) from 21 per cent to 23 per cent, increasing taxes on fuel, alcohol and tobacco taxes by 10 per cent, and taxing illegal construction This programme is an essential condition for the European members to authorise the release of the loans, urgently needed by the Greek state to avoid an impending default, the Spanish presidency of the EU said. Reacting to Papandreou's announcement of Greek agreement to the deal, European Commission President Jose Barroso said on May 2 that the Greek government had committed to a "difficult but necessary reform process" to put the Greek economy on a sustainable path and restore confidence. "The Commission considers that this agreed set of measures constitutes a solid and credible package," Barroso said. The assistance would be decisive to help Greece bring its economy back on track and preserve the stability of the euro area, he said. Thousands of protesters rallied in Athens on May 1 against the government's plan to make deep budget cuts, the Voice of America reported. Protesters struck police with sticks and threw fire bombs in the Greek capital at the May Day rally. Police fired tear gas to break up the crowds. Tens of thousands marched in the streets of Athens and other cities and at some closed seaports, chanting "IMF and EU Commission out!" Greece's public sector union has been leading opposition to austerity measures the government is planning as part of the international economic rescue package. Union officials have expressed concern the measures will include tax increases and a wage freeze for government workers. They have called for a general strike on May 5. As initial details of some of the measures emerged in media reports, unions were said already to have voiced rejection of the deal with the IMF and the EU. Politicians and investors are worried that economic problems could spread if Greece fails to pay back its debt. Those concerns grew in the past week when a key credit rating agency, Standard and Poor's, downgraded its credit ratings of Greece, Portugal and Spain. In April, euro zone members promised to loan 30 billion euro to Greece in 2010, a figure which would be supplemented by between 10 and 15 billion euro from the IMF during the first year, the Spanish EU Presidency said on May 2. According to agreements made at the leaders' summit on March 25, the decision to activate joint aid for Greece had to be taken unanimously by the 16 members of the Eurogroup, and on the basis of an assessment opinion delivered by the European Commission and the ECB. The measures agreed to by Greece's cabinet on May 2 are to fast-tracked towards parliamentary approval, reports said.