Greece and its creditors have moved closer to clinching a deal this weekend that would allow the cash-strapped country avoid a default and stay in the euro currency club, after Prime Minister Alexis Tsipras made more concessions.

Officials said on Friday that Greece agreed to cut pensions to a level very close to what creditors had demanded before they release new loans.

The move comes only days after Greece proposed almost $9 bln in budget savings over two years.

Germany and other creditors, particularly the International Monetary Fund, said those proposed measures were not good enough, arguing they rely too much on business taxes that could hurt growth.

Friday's latest proposals brought Tsipras from the IMF and European institutions much closer together, enough for some to anticipate that an emergency meeting on Saturday of the eurozone's 19 finance ministers could bring the decisive breakthrough.

"Tomorrow's meeting is of decisive character," German Chancellor Angela Merkel said after meeting Tsipras and French President Francois Hollande.

European Commission President Jean-Claude Juncker agreed. "There is a real chance to conclude an agreement," he said, adding that Saturday was "a crucial day not only for Greece but for the euro area as a whole. I'm quite optimistic but not overly optimistic."

Under the latest proposal, Athens said it will cut the contribution from the Greek state to pensions by between 0.25 percent and 0.5 percent of GDP this year and by 1 percent next year.

An official from one of the creditor institutions said that if you assess both sides "the difference now is very, very small."

Megan Greene, chief economist at Manulife Asset Management, said that "The gap between Greece and its creditors looks much smaller now that Greece has caved on some of its proposed pension reforms."

Negotiations have stumbled on what economic reforms Greece must make in return for the remaining 7.2 billion euros in its international bailout programme.

Should it default on its debt, Greece could eventually have to leave Europe's joint currency, the euro. That would likely plunge the country back into a deep and long recession and shake European and global markets.

Running out of time

European leaders have demanded finance ministers from eurozone countries reach an agreement on Saturday on the reforms Greece must make to unfreeze its bailout loans.

Tsipras, elected in January on promises to repeal the deep austerity measures imposed on the country in return for two bailouts totaling more than $260 bln, has been adamant he will not agree to more recessionary measures.

With the European part of Greece's bailout expiring on Tuesday, and with it the country's potential access to the remaining funds, time is running out.

"It really has to happen tomorrow," said Jeroen Dijsselbloem, who heads the 19 eurozone finance ministers' meetings known as the eurogroup, said of a potential deal.

Any agreement, he noted, would have to go through the parliaments of Greece and several other eurozone countries, meaning the weekend is the latest possible time for a deal to be reached before June 30.

Greek officials have said all possibilities remain open, including that of not reaching an agreement.

In the current climate, with creditors insisting on draconian budget savings, "the chances are very small" for an agreement, Labor Minister Panos Skourletis said on private Mega television.

Source: Agencies