UPDATE 1-Greece to licence online betting by end '11-source

* Greece to award up to 50 internet gambling licences-source

* Plans to allow thousands of videolotto machines-source

* Government sees 700 mln euros in gaming revenues this year

* Illegal betting estimated at 4 billion euros a year

(Adds details, background)

ATHENS, Jan 24 (Reuters) - Greece plans to award up to 50 internet gambling licences and allow thousands of low-stake videolotto (VLT) gaming machines by the end of the year, a senior government official told Reuters on Monday.

Opening up gaming will be a major step for the debt-ridden country, which hopes to get hundreds of millions of euros in extra revenues. The move will also put it back in line with EU regulations and allow it to stop paying hefty fines to Brussels.

"The bill is expected to be voted within the first quarter of the year," the official, who has direct knowledge of the government plans, said on condition of anonymity. "Our aim is to tender the licences by the end of the year."

Greece aims at proceeds of at least 700 million euros ($949 million) from new gaming licences and royalties this year as part of the EU/IMF bailout plan that saved it from bankruptcy last year. It has earmarked another 625 million euros for 2012.

The country had struggled to crack down on unlicenced gambling, estimated at about 4 billion euros a year, since it imposed a blanket ban on gaming machines in 2002.

Betting monopoly OPAP (OPAr.AT) and slot machines in casinos were excluded from the ban.

The official did not say what the duration of the new betting licences or the payout would be. Referring to the VLTs, the source added that there would be a limit on wagers.

Greece's finance ministry was not immediately available for comment. ($1=.7376 Euro) (Reporting by Lefteris Papadimas and Angeliki Koutantou; Editing by Ingrid Melander and Jon Loades-Carter)