* Greek MPs to vote on reform bill including job cuts
* PM announces first major tax cut since crisis began
* Restaurant VAT to be cut to 13 pct from 23 pct on Aug 1
Thousands of Greek workers chanting anti-austerity slogans flocked outside parliament on Wednesday, hours before lawmakers inside vote on a divisive reform bill that would cut thousands of public sector jobs.
Prime Minister Antonis Samaras's government is expected to scrape through the vote, despite a much-slimmer majority of only five seats in parliament after losing an ally over the decision to yank the state broadcaster off air and fire its 2,600 staff.
The multi-pronged bill - whose passage is a condition for Greece to unlock further aid - includes plans for a public sector transfer and layoff scheme mainly affecting teachers and municipal police.
About 5,000 Greeks flooded the street outside parliament, some chanting: "We will not succumb, the only option is to resist" and waving orange flags - though turnout was much smaller than in protests last year.
"After 12 years on the job, they fire us in one night," Patra Hatziharalampous, a 52-year-old school guard in uniform said between sobs. "If they have any guts, they should say no to the bailout and take some of the bill's articles back."
Hours before the vote, Samaras announced Greece's first tax cut since its crisis began nearly four years ago, in a bid to placate protests and an increasingly restive public mood.
"Despite the difficulties, important and significant things are taking place in our country," Samaras said in a surprise television address, announcing that value-added tax (VAT) in restaurants, which was raised to 23 percent in 2011, would be cut to 13 percent from Aug. 1.
"We will not relax. We will continue climbing up the hill, we will reach the top, which is not far, and better days will come for our people," he said.
The government had made a show of arguing for the restaurant VAT cut during its latest talks with lenders, and analysts said the move was a symbolic attempt to show austerity-hit Greeks that there was light at the end of the tunnel.
Samaras said the cut would help curb tax evasion, a major problem in the country and one of the reasons it slid into a debt crisis in 2009, but warned that if tax evasion persisted the VAT would revert to 23 percent.
"The crucial thing is that it was announced now and not after the summer," said Thomas Gerakis, head of Marc Pollsters. "How it will benefit consumers remains to be seen."
Athens has been limping along on two bailouts worth over 240 billion euros ($315 billion) since 2010, which it has secured at the price of wage cuts and tax rises that have triggered a six-year recession and sent unemployment to 27 percent.
The latest bill agreed with European Union and International Monetary Fund lenders as a condition for nearly 7 billion euros ($9.20 billion) in aid also includes a luxury tax on houses with swimming pools and owners of high performance cars.
But the move that has drawn the most anger is the plan to place 25,000 workers into the layoff scheme by the end of 2013, giving them eight months to find another position or get laid off. Jobs in the public sector are widely seen as oversized, inefficient and filled with patronage hires, but many Greeks believe society can no longer go tolerate cuts or tax hikes.
Uniformed municipal police, garbage collectors in orange vests and hundreds of other public sector workers have taken to the streets of Athens almost daily on motorbikes in over a week of rallies, blowing whistles, honking horns and blaring sirens.
"You are drawing blood from an organism suffering from anaemia," George Varemenos, a lawmaker from the radical leftist opposition Syriza party told a parliamentary session.
"People will be running to the shelters whenever you mention the word reform."