Greece was closing in on an initial deal with private bond holders on Friday that would prevent it from tumbling into a chaotic default but lose investors up to 70 percent of the loans they have given to Athens.
The agreement, to be followed up by technical talks over the weekend, could come later in the day, sources close to the negotiations said.
Private bondholders would most likely incur a real loss of 65 to 70 percent, with the new bonds having a 30-year maturity and offering a progressive coupon, or interest rate, averaging out at 4 percent, a banking official close to the talks told Reuters.
Cash-strapped Greece is fast running out of time as it pushes to wrap up an agreement by Monday paving the way for a fresh injection of aid before 14.5 billion euros (11.9 billion pounds) of bond repayments fall due in March.
There could be a pre-agreement tonight, but technical discussions with the lawyers will likely continue over the week-end and next week, another source close to talks said, adding that involving the ECB in the deal was also discussed.
We expect them to make an effort as well. It could be through a special deal, as you would expect for a body like the ECB, the source said.
After a breakdown in talks last week over the coupon, or interest payment, that Greece must offer on its new bonds raised fears of a disastrous bankruptcy, the two sides resumed negotiations on Thursday.
Charles Dallara, who negotiates in the name of the private bondholders through the International Institute of Finance, will meet with senior Greek officials later in the day, Finance Minister Evangelos Venizelos said after concluding a first round of talks in the morning.
In a carefully choreographed series of meetings, senior euro zone finance ministers will hold a conference call and Prime Minister Lucas Papademos will meet chief EU, IMF and ECB inspectors before resuming talks with Dallara.
The stakes could not be higher. Greece needs to have a deal in the bag before funds are doled out from a 130 billion euro rescue plan that the country's official lenders, the European Union and the International Monetary Fund, drew up in October.
The paperwork involved alone is expected to take weeks, meaning failure to secure a deal soon could put Athens at risk of a chaotic default in March, which in turn could jolt the financial system and tip the global economy into recession.
Adding to the pressure, officials from the troika of foreign lenders have begun meetings with the Greek government on Friday to discuss reforms and plans to finalise that bailout package.
The deal must be completed. There is no more time left, said a Greek government official who requested anonymity.
The swap is aimed at cutting 100 billion euros off Greece's over 350 billion euro debt load. The second bailout - drawn up on condition Greece pushes through painful cuts and structural reforms - is expected to reduce Greece's debt to a more manageable 120 percent of gross domestic product in 2020 from about 160 percent now.
Investors have also bridled at Greece's threat to enforce losses if not enough bondholders sign up to the deal.
Greece is stumbling through its worst economic crisis since World War Two, with unemployment at record highs and near-daily protests and strikes against austerity measures that have deepened an already brutal recession.
Nearly one out of two youths is unemployed and anger against waves of tax hikes and pay cuts is running high.
(Aditional reporting by Athens bureau; Writing by Ingrid Melander and Harry Papachristou. Editing by Jeremy Gaunt.)