|Politicians are trying to ensure cash-strapped Greece avoids sinking into a chaotic default next month [Reuters]
Crisis talks on a debt deal for Greece among the three leaders of parties supporting the coalition government has been suspended.
After five hours of discussions, Lucas Papademos, the Greek prime minister, said the talks would continue on Monday, saying that they had however reached an agreement on many issues.
Greece is racing to finalise austerity steps needed for a new 130 billion euro bailout without which it would face bankruptcy in late March.
That included measures to cut wages and non-labour costs to make the Greek economy more competitive and spending cuts worth 1.5 per cent of gross domestic product this year, the prime minister said.
Leaders must respond to proposals made by the country's international lenders for a new bailout deal by noon (10:00 GMT) on Monday, a spokesman for the PASOK socialist party said on Sunday.
"Political leaders should give a response in principle tomorrow afternoon [to the European Union]," Panos Beglitis said.
They would later discuss the plan by the "troika" of international lenders at a meeting chaired by Papademos.
Papademos had called the emergency meeting after Finance Minister Evangelos Venizelos warned that the government has only until Sunday night to produce a second financing package.
Venizelos made the statement after eurozone ministers threatened to cut off funds if Greece offers no proof of reforms. He said the moment is crucial, and that Greece is "on a knife edge".
A technocrat appointed in November, Papademos is trying to convince lenders and politicians to sign off on the bailout and ensure cash-strapped Greece avoids sinking into a chaotic default when big bond redemptions are due next month.
Papademos's first mission on Sunday was to at least agree to a preliminary deal with the "troika" of foreign lenders on reforms included in the bailout, after several days of talks failed to resolve the issue of cutting wages and spending.
Al Jazeera's John Psaropoulos, reporting from the capital Athens, said "the political leaders are still trying to find a formula for effectively horse-trading one concession for another gain."
"The creditors that are talking to the Greeks really do mean business when they say 'you won't get the money unless you sign onto these reforms'," he said.
Greek officials have emerged increasingly despondent after each round of talks, complaining that the European Central Bank (ECB), European Union (EU) and International Monetary Fund (IMF) troika were refusing to yield on demands to cut the minimum wage level, terminate holiday bonuses and dismiss public sector workers.
"There is also an election expected later this year, therefore, the troika wants to know that the future leadership will also be bound to the present agreement," our correspondent said.
Papademos then faces an even tougher task convincing party chiefs in his own national unity coalition to back the reforms demanded by the lenders at the risk of ruining their chances at national elections expected in April.
He met the lenders before meeting with the socialist, conservative and far-right party leaders in his coalition later in the day.
The conservative New Democracy and the far-right LAOS party in particular have staunchly opposed further wage and spending cuts, arguing that risks pushing Greece into an even deeper recession and imposing more pain on struggling Greeks.
"The truth is that people are tired. They can't put up with more austerity," Yannis Michelakis, the New Democracy spokesman, told the Real News weekly.
LAOS leader George Karatzaferis, meanwhile, rejected what he called the "ultimatum" to strike a deal on Sunday.
Papademos's government implored them to be more co-operative.
"We have carried out superhuman negotiations. And so political leaders must help us now," a senior government official said, adding that the party chiefs were free to join the Sunday talks with lenders if they wanted.
Markets on edge
Greece's lenders, who want spending cuts worth about one per cent of GDP - or just above two billion euros - this year, have demanded all political leaders endorse the cuts irrespective of the outcome at the polls.
Athens has negotiated without success for weeks on the bailout package and a debt restructuring plan, putting itself dangerously close to bankruptcy as 14.5 billion euros of debt falls due in mid-March.
The lack of agreement has kept financial markets on edge as investors worry a messy default could cause shockwaves across the financial system, triggering a credit crunch and sending the global economy back into recession.
Athens says it has made some progress by agreeing a plan to recapitalise Greek banks and details on privatisation, even if bigger issues on reform remain unresolved.
A senior banker told the Reuters news agency the recapitalisation would occur mainly via common shares with restricted voting rights.
The talks have moved slowly also because 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 per cent on the Greek debt they hold in a bid to ease Greece's debt burden by 100 billion euros.
But Greece's deteriorating economic prospects and struggles with reform have fed concern that will not be enough to get its debt back to a mangeable level and Athens wants public creditors like the ECB to also take part in the bond swap.
Representatives for the banks and insurers were expected to continue talks in Athens over the weekend on the bond swap, which Venizelos has said is now the easier part of the overall process to save Greece.
The debt swap and bailout was meant to reduce Greece's debt to 120 per cent of GDP by 2020, but EU sources say eurozone governments may now have to lend an extra 15 billion euros on top of the 130 billion agreed for that to happen.
Source: Al Jazeera and agencies