UPDATE 2-At least 77 killed, 131 injured, after train derails in Spain
* Tragedy occurs on eve of Santiago de Compostela's main festival
* Government working on assumption it was an accident
* Ancient pilgrimage city cancels festivities, goes into mourning
SANTIAGO DE COMPOSTELA, Spain, July 25 (Reuters) - A train derailed outside the ancient northwestern Spanish city of Santiago de Compostela on Wednesday evening, killing at least 77 people and injuring up to 131 in one of Europe's worst rail disasters.
Bodies covered in blankets lay next to the overturned carriages as smoke billowed from the wreckage. Firefighters clambered over the twisted metal trying to get survivors out of the windows, while ambulances and fire engines surrounded the scene.
The government said it was working on the assumption the derailment, which occurred on the eve of the city's main religious festival, was an accident.
Sabotage or attack was unlikely to be involved, an official source said, though the devastation will have stirred memories of a train bombing in Madrid in 2004, carried out by Islamist extremists, that killed 191 people.
The Santiago de Compostela train operated by state rail company Renfe with 247 people on board derailed as the city prepared for the festival of Saint James, when thousands of Christian pilgrims from across the world pack the streets.
The city's tourism board said all festivities, including the traditional High Mass at the centuries-old cathedral, were cancelled as the city went into mourning following the crash.
"It was going so quickly. ... It seems that on a curve the train started to twist, and the wagons piled up one on top of the other," passenger Ricardo Montesco told Cadena Ser radio station.
"A lot of people were squashed on the bottom. We tried to squeeze out of the bottom of the wagons to get out and we realised the train was burning. ... I was in the second wagon and there was fire. ... I saw corpses," he added.
Prime Minister Mariano Rajoy, who was born in Santiago de Compostela, will visit the site on Thursday morning, his spokeswoman said.
"In the face of a tragedy such as just happened in Santiago de Compostela on the eve of its big day, I can only express my deepest sympathy as a Spaniard and a Galician," Rajoy said in a statement.
TRAVELLING TOO FAST?
El Pais newspaper cited sources close to the investigation as saying the train was travelling at over twice the speed limit on a sharp curve.
Both Renfe and state-owned Adif, which is in charge of the tracks, had opened an investigation into the cause of the derailment, Renfe said.
An official source said no statement would be made regarding the cause until the black boxes of the train were examined, but said it was most likely an accident.
"We are moving away from the hypothesis of sabotage or attack," he said.
Clinics in Santiago de Compostela were overwhelmed with people flocking to give blood, while hotels organised free rooms for relatives. Madrid sent forensic scientists and hospital staff to the region on special flights.
The death toll was 77, a spokeswoman for Galicia's Supreme Court said on Thursday morning, adding that the figures were still provisional. She said that 73 three people had died at the site of the derailment and four died in hospital.
Up to 131 people were injured, a Galicia-based spokeswoman for the office of the central government had earlier said.
"The scene is shocking, it's Dante-esque," said the head of the surrounding Galicia region, Alberto Nunez Feijoo, in a radio interview.
The eight-carriage train was travelling from Madrid to Ferrol on the Galician coast when it derailed, Renfe said in a statement.
The disaster happened as Spain is struggling to emerge from a long-running recession marked by government-driven austerity to bring its finances into order. Firefighters called off a strike to help with the disaster, while hospital staff, many operating on reduced salaries because of spending cuts, worked overtime to tend the injured.
The city's main festival focuses on St James, one of Jesus' 12 disciples whose remains are said to rest there and who is patron saint of Galicia.
The apostle's shrine there is the destination of the famous El Camino de Santiago pilgrimage, followed by Christians since the Middle Ages.
The derailment happened less than two weeks after six people died when a train came off the tracks and hit the platform at a station in central France.
That accident may have been caused by a loose steel plate at a junction, French train operator SNCF said.
Wednesday's derailment was one of the worst rail accidents in Europe over the past 25 years.
In November 2000, 155 people were killed when a fire in a tunnel engulfed a funicular train packed with skiers in Austria.
In Montenegro, up to 46 people were killed and nearly 200 injured in 2006 when a packed train derailed and plunged into a ravine outside the capital, Podgorica.
In Spain itself, 41 people were killed the same year when an underground train derailed and overturned in a tunnel just before entering the Jesus metro station in Valencia.
(Reporting by Inmaculada Sanz, Sonya Dowsett, Sarah White, Andres Gonzalez, Blanca Rodriguez, Julien Toyer and Emma Pinedo; Writing by Sonya Dowsett; Editing by Julien Toyer, Peter Cooneya and John Stonestreet)