Greece, creditors line up rival reform proposals to unlock aid

By Renee Maltezou and Leigh Thomas

ATHENS/PARIS (Reuters) - Greece's creditors are close to finishing a draft agreement to put to the leftist government in Athens, a source close to the talks said on Tuesday, injecting new momentum into long-running negotiations to release aid for the cash-strapped country.

Hours earlier, Greek Prime Minister Alexis Tsipras said Athens had submitted its own proposal to lenders - an apparent effort to pre-empt a take-it-or-leave-it offer by the creditors and to show Greek voters that Athens made its move first.

The statements of proposal and counter-proposal came after leaders of Germany, France and the lending institutions held emergency talks on the Greek debt crisis in Berlin late on Monday in a sign of top-level concern about the impasse.

Starved of aid and access to bond markets, Athens is precipitously close to running out of money. It has threatened to default on an IMF payment this week without a deal, though it also says it will reject any ultimatums.

Failure to reach agreement this month could trigger a Greek default and lead to the imposition of capital controls and a potential exit from the euro zone, dealing a serious blow to Europe's supposedly irreversible single currency.

"We have submitted a realistic plan for Greece to exit the crisis. A realistic plan, whose acceptance by the institutions, our lenders and our partners in Europe will mark the end of the scenario of divisions in Europe," Tsipras told reporters.

"It is now clear that the decision on whether they want to adjust to realism ... the decision rests with the political leadership of Europe."

A source close to the talks said the lenders in the meantime were finalizing details of their offer to Athens.

"We are almost done," the source said.

A European Commission spokeswoman said many documents were being exchanged among negotiators, which was "already a good sign". Talks with Greece were continuing and "we are not there yet", she said.

A euro zone source said the Greek document was insufficient and was not officially on the table. It made no significant concessions on the main outstanding issues of pension and labor market reform, fiscal targets and the size of the civil service that have dogged four months of tough negotiations.

The European Union's economics chief said earlier Athens had put forward first proposals for pension reform as the talks reach a crunch point this week with Greek funds drying up.

The chairman of euro zone finance ministers, Jeroen Dijsselbloem, who was not at the Berlin meeting, said there were growing indications that Greece wanted a deal, but that required the Greek government to tell its voters honestly that it will not be able to deliver on all its election promises.

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"There are signs that Greece and Tsipras are motivated to achieve a breakthrough," Dijsselbloem told RTL Nieuws. "We aren't far enough along and time is pressing."

"The bottom line is that we are not going to meet them halfway," he said. "The package as a whole must make sense in budgetary terms."

"REAL INTENSITY"

The leaders who met in Berlin agreed to work with "real intensity" to try to wrap up the negotiations in the coming days and to keep in touch with each other and with Tsipras.

Their meeting showed that national and international leaders have now taken the battle to keep Greece in the euro zone into their own hands after months of insisting it was a matter for technical negotiations among experts.

A Greek government official said Athens would make a 300 million euro ($329.58 million) repayment to the IMF on Friday as due if there was an agreement with the creditors, hinting it might otherwise withhold the money without saying so explicitly.

"If we judge that a deal has been sealed, then we will make the June 5 payment normally," the official said, adding that the money would be transferred even if a preliminary agreement had not yet been approved by Eurogroup finance ministers.

EU Economy Commissioner Pierre Moscovici said the talks were making progress at last, citing what he said were new Greek proposals on pensions, a core issue for the creditors, who are demanding some benefit cuts and a crackdown on early retirement to make the complex system financially sustainable.

Greek officials played down talk of new pension proposals.

"Greece has been flexible for a long time on pension reform, willing to scrap incentives for early retirement and proceed with merging pension funds. This is what is still on the table," a Greek government official said.

Greece's central bank governor, Yannis Stournaras, who served as finance minister in a previous conservative-led government, urged the government to respect the "sacrifices" its people had made to stay in the euro, citing a 35 percent drop in living standards since the crisis began in 2009.

Moscovici deflected Greek demands for official debt relief, saying the issue of making Greek debt sustainable in the longer term would only be addressed once Athens had accepted a cash-for-reform deal to release some 7.2 billion euros in frozen aid.

That program expires at the end of June unless there is an agreement.

The ECB's top banking supervisor, Daniele Nouy, stressed on Tuesday that Greece's banks remain solvent despite deposit outflows and the government's cash squeeze - a key condition for the central bank continuing to provide emergency liquidity.

A French presidential official hinted after the Berlin talks that there were still some differences among the lenders.

Greek officials have said the IMF is toughest in demanding pension cuts and opposing any restoration of collective wage bargaining, while some euro zone governments have privately accused Juncker and Moscovici of being too soft on Athens.