Greece's coalition parties must tell the European Union by Monday whether they accept the painful terms of a new bailout deal as EU patience wears thin with political dithering in Athens over implementing reforms.
Technocrat Prime Minister Lucas Papademos put on a brave face on Sunday as he tried to get leaders of the three parties in his government to sign off on terms of a 130 billion euro rescue, which Greece needs soon to avoid a chaotic debt default.
Papademos said in a statement the party chiefs - who may face angry voters in parliamentary polls as soon as April - had agreed measures including wage cuts and other reforms as part of spending cuts worth 1.5 percent of gross domestic product.
But a spokesman for the PASOK socialist party said a number of major issues demanded by the Troika, representing Greece's EU, European Central Bank and IMF lenders, remained unresolved late on Sunday.
Talks on the new bailout, which would be Greece's second since 2010, and an accompanying deal to ease the country's huge debt burden via its private creditors accepting deep losses on the bonds they hold, have dragged on for weeks, stretching the EU's patience to breaking point.
Now the parties - PASOK, the conservative New Democracy and far-right LAOS - must respond to a working group of senior euro zone finance ministry officials who are preparing for a meeting of their ministers later in the week.
The political leaders must give their response in principle by noon tomorrow, so that it can be taken to the Euro Working Group in Brussels, said PASOK spokesman Panos Beglitis.
Beglitis made clear the leaders of the three parties still had much to negotiate as the noon (1000 GMT) deadline for a response nears, most notably on labour reforms demanded by Greece's lenders and on how to shore up domestic banks, which are up to their necks in Greek government bonds now worth a fraction of their face value.
There are two big issues left - labour and banks ... those have been left for tomorrow, he said.
No meeting of the Euro Working Group has been formally scheduled for Monday but it could confer either by conference call or schedule a face-to-face meeting at short notice, depending on the outcome of talks in Athens.
PASOK and LAOS officials were meeting among themselves late on Sunday night and Papademos was also due to meet troika representatives again during the evening.
With Greece facing 14.5 billion euros of debt repayments in March, a bill it cannot meet without further bailout funds, the stakes could not be higher. Finance Minister Evangelos Venizelos said earlier in the weekend that Athens had only until Sunday night to clinch a second financing package from the lenders.
We are on a knife edge, he said on Saturday after what he called a very difficult conference call with his euro zone counterparts. The moment is very crucial.
Greek officials have emerged increasingly despondent after each round of talks, complaining that the European Central Bank, European Commission and International Monetary Fund troika was stubbornly refusing to yield on demands to cut the minimum wage level, axe holiday bonuses and fire public sector workers.
New Democracy and the far-right LAOS party in particular have staunchly opposed further wage and spending cuts, arguing they risk pushing Greece into an even deeper recession and imposing more pain on struggling Greeks.
Papademos, a former central banker, said progress had been made during Sunday's five hours of negotiations with New Democracy chief Antonis Samaras, PASOK head George Papandreou and LAOS leader George Karatzaferis.
The budget cuts worth 1.5 percent of GDP this year appeared to be more than the troika wanted initially although with the Greek economy on a downward trajectory that is a moving target.
Greece's lenders, initially demanded spending cuts worth about 1 percent of GDP -- or just above 2 billion euros -- this year, and insist all political leaders endorse the cuts irrespective of the outcome of the elections.
Papademos said the measures to cut wages and non-labour costs aimed to make the Greek economy more competitive, but he gave few details.
Athens has wrangled without luck for weeks on the bailout package and a debt restructuring plan, putting itself dangerously close to bankruptcy.
The lack of agreement has kept financial markets on tenterhooks as investors fret a chaotic default could cause shockwaves across the financial system in Europe and beyond.
The slow progress has angered Greece's European partners. Euro zone officials say finance ministers told Greece on Saturday it could not go ahead with an agreed deal to restructure privately held debt until it guaranteed it would implement reforms.
There is a great sense of frustration that they are dragging their feet, one euro zone official said.
The troika wants agreement on all parts of the complex Greek rescue deal, including any contribution by public creditors like the ECB, before approving the bailout, a source close to the talks said.
The rescue package, drawn up in October, also includes a bond swap under which banks and insurers will take real losses of about 70 percent on the Greek debt they hold in a bid to ease Greece's debt burden by 100 billion euros.
Representatives for the private creditors held talks with Papademos on Sunday on the bond swap, which Venizelos has said is now the easier part of the overall package to resolve.
The debt swap and bailout was designed to bring Greece's debt down to 120 percent of GDP by 2020, but EU sources say euro zone governments may now have to cough up an extra 15 billion euros on top of the agreed 130 billion for that to happen.
In a sign of how politically difficult any further aid to Greece will be, a poll in German newspaper Bild am Sonntag showed a majority of Germans feel the single currency bloc would be better off if Greece left. [ID:nL5E8D5083]
Within Greece, pressure is building to oppose further cuts which many economists say will drive the country into a downward spiral of recession and rising debt.
Greece's two major labour unions plan a 24-hour strike on Tuesday in protest at the demands made of it.
Despite our sacrifices and despite admitting that the policy mix is wrong, they still ask for more austerity, Ilias Iliopoulos, secretary general of public sector union ADEDY, told Reuters.
(Additional reporting by Angeliki Koutantou and Luke Baker in Brussels; Writing by Deepa Babington and David Stamp. Editing by Mike Peacock)