Greece and its private creditors worked on stitching together the final bits of a complex debt swap agreement, amid growing optimism a deal will be reached in time to avert an unruly default.
After weeks of muddling through round after round of inconclusive talks, the negotiations appear to be in their final phase, though it was unclear if a preliminary deal could be secured in time for Monday's European Union summit.
Greek officials and Charles Dallara, chief negotiator for banks and insurers, left today’s negotiating session without making any comment.
Earlier, prime minister Lucas Papademos said he expected the deal to be concluded within days.
For Athens, progress on the debt swap front is at risk of being overshadowed by increasingly problematic talks with its foreign lenders, whose inspectors are in town demanding politically unpopular reforms.
"Today will be another tough day," said George Karatzaferis, leader of the far-right LAOS party, one of three parties in Mr Papademos's emergency coalition government.
"We will see whether we can bear the burden that lies ahead.
"European paymaster Germany is pushing for Athens to relinquish control over its budget policy to European institutions as part of discussions over a second rescue package, a European source said.
With many Greeks blaming Germans for the austerity medicine their country has been forced to swallow, officials in Athens dismissed the idea as out of the question.
"There is no way we would accept such a thing," a Greek government official said, on condition of anonymity.
The official said a similar proposal had been made in the past by a Dutch minister without getting anywhere.
The European Commission, the executive arm of the 27-country bloc, said it wanted the Greek government to maintain autonomy.
"The Commission is committed to further reinforcing its monitoring capacity and is currently developing its capacity on the ground," said a spokesman.
"But executive tasks must remain the full responsibility of the Greek Government, which is accountable before its citizens and its institutions. That responsibility lies on their shoulders and it must remain so."
A government source in Berlin said Germany's proposal was aimed not just at Greece but at other struggling euro zone members who receive aid and are unable to make good on their obligations as well.
"It is not a 'lex Greece' but rather a suggestion how one can deal in general with countries that are unable to implement their promised reforms in exchange for support," the source said."
All options can obviously be introduced only with the agreement of, for example, the Greeks themselves," he added. Separately, a senior member of parliament in chancellor Angela Merkel's ruling Christian Democrats said taking control of Greece's budget was the right way to go.
"In view of the fact that many of the proposals for Greece have not been implemented, the suggestion for more control and supervision goes in the right direction," Norbert Barthle, a budget policy leader for the CDU in parliament said.
Crushed by €350 billion of debt and running out of cash, Greece finds itself in a precarious position as it scrambles to appease the troika of foreign lenders and stitch up a deal with private creditors simultaneously.
Unimpressed with Athens dragging its feet on reforms, the "troika" of foreign lenders - the European Commission, IMF and European Central Bank - have warned they could hold up aid if more is not done to restructure the Greek economy.
"It's all very dense, difficult and crucial," a Greek finance ministry official said. "There is optimism because the country needs to survive and we need to protect its citizens because they have suffered a lot.
"The debt swap, in which private creditors take a 50 per cent cut in the nominal value of their Greek holdings in exchange for cash and new bonds, is also a prerequisite for the country to secure a €130-billion rescue plan drawn up last year.
The two sides have broadly agreed that new bonds under the swap would have a 30-year maturity, but the talks have struggled over the interest rate Greece must pay on the new bonds and whether the European Central Bank and other public creditors will also accept losses on their holdings.
A debt deal, aimed at chopping €100 billion off Greece's debt load, must be sealed in about three weeks as Greece has to repay €14.5 billion of debt on March 20th.
Reuters