After weeks of intense negotiations with its international creditors, Greece will announce fresh austerity measures on Friday in an effort to restore waning confidence in its economic performance a year after securing €110bn (£96bn) in emergency loans, the biggest bailout in western history.

The prime minister, George Papandreou, who is facing mounting domestic opposition, will present new cost-cutting policies deemed vital for the European Union and the International Monetary Fund (IMF) to release a fifth cash injection of €12bn to the debt-stricken country.

The plan, which is likely to include savage spending cuts, tax rises and the acceleration of a huge privatisation programme, aims to trim the budget by €6.4bn this year alone. Officials said the steps would be outlined by Papandreou in talks with Jean-Claude Juncker, head of the Eurogroup finance ministers, in Luxembourg.

Despite initially winning plaudits for his determination to implement draconian reforms, the socialist leader has been heavily criticised for Greece's lax approach to fiscal consolidation in recent months. The IMF upped the ante last week by warning that it might even withhold its share of the next loan instalment.

Athens was dealt a further blow when the ratings agency Moody's downgraded its creditworthiness by three notches from B1 to Caa1, sending Greek bonds deeper into junk territory. It also put the chances of a sovereign debt default at "50-50".

With Greece's recession worse than ever expected and unemployment at a historic high of 16%, the prospect of further austerity has met with outrage. In an increasingly electric atmosphere, with tens of thousands of protesters converging daily on public squares and politicians being heckled in public, unions warned that the backlash would be swift and sharp.

Yiannis Panagopoulos, head of the GSEE union confederation, said: "These measures amount to a perpetual crime … our reaction will be immense. This is just the beginning. They [the government] have not seen anything yet."

The plan, which has seen Greek officials engage in horse-trading with inspectors from the IMF, EU and European Central Bank for close to a month, has also divided the ruling Pasok party. Ministers have denounced the "troika" for overstepping the mark, with many calling the demand for extended foreign supervision of the day-to-day running of Greece's public finances unacceptable. The country's creditors have insisted that the privatisation programme, the plan's centrepiece, is overseen by a foreign agency.

With tensions running high, several leading socialists have hinted they might vote against the measures when they go before parliament next week. "A year after signing the memorandum [outlining last year's bailout] we are at a crucial juncture again. Why?" asked 16 Pasok MPs who co-signed a letter wrote to the prime minister demanding that the austerity programme be debated properly in parliament first. "It is not just an issue of political responsibility [that the measures are discussed]. It is a question of patriotism and democracy."

But with Greece's €340bn debt load looking increasingly unsustainable without a new aid package, the pressure on Papandreou to enforce the plan without further ado is immense.

Ending weeks of speculation, Juncker confirmed on Thursday that Athens would probably receive a second financial lifeline by 29 June when EU leaders hold their next summit. "My personal feeling and knowledge is that Greece will have a new programme," said the Euro group chief. But he emphasised that the aid would only be given "under strong conditionality." "That means that Greece will have to prove it will be able to meet its budgetary goals for 2011. Greece will have to implement a privatisation programme."