Greek parliament prepares to approve last-ditch reform proposals

(ATHENS) - Greece's parliament was expected, in the early hours of Saturday, to approve last-ditch government proposals to its eurozone creditors aimed at preventing a dreaded exit from the eurozone.

The reforms proposed by the government have sparked criticism from hardline members of the radical left ruling party Syriza, but most opposition parties have expressed willingness to back them.

A majority of lawmakers from Syriza and other parties earlier on Friday granted their approval in a committee vote. the full plenary session vote is expected to be held early Saturday morning.

"If the current deal comes to pass, it will be a difficult deal," new Finance Minister Euclid Tsakalotos warned lawmakers.

But he added that the government wanted parliament's approval "to strengthen the country's bargaining position, to achieve better terms in the agreement."

The latest reform proposals put forward by Athens were cheered by France and Italy on Friday, raising hopes that a last-ditch compromise can be reached to prevent a "Grexit."

In them Greek Prime Minister Alexis Tsipras concedes ground on major sticking points, including creditors' demands to overhaul pensions, increase sales taxes, and commit to privatisations.

But the proposed measures limit changes on other thorny issues, including tax breaks for Greece's islands and cuts to military spending.

- Debt mountain -

Tsipras hopes his new offer will open the door to creditors discussing another round of relief from Greece's suffocating 320-billion-euro ($350-billion) mountain of debt.

The proposal aims to procure financing "for three years, debt adjustment and a front-loaded investment package of 35 billion euros ($38 billion)," a Greek government source said.

But the Greek leader also risks alienating large numbers of the ruling party's supporters, who rejected in a national referendum last Sunday a very similar set of proposals put forward by Greece's creditors.

Some 8,000 people gathered in Athens ahead of the parliamentary vote to protest against carrying on with austerity measures, police said.

In a bid to head off a possible challenge to the measures within his hard-left party Syriza, Tsipras urged his lawmakers "to stand united and firm in front of these important decisions."

Tsakalotos said Friday he believed "many" of his country's demands for debt relief will be accepted by eurozone partners whose ministers will meet Saturday.

He notably expressed confidence that Greece will be permitted to roll over a debt of 27 billion euros ($30 billion) in bonds held by the European Central Bank to the European Stability Mechanism, which would push back repayments.

Any new Greek rescue needs to be approved unanimously by eurozone members.

- Euro, markets soar -

French President Francois Hollande said "the Greeks have shown a determination to want to stay in the eurozone because the programme they are presenting is serious and credible."

However he cautioned that "nothing is decided yet."

Italian Prime Minister Matteo Renzi declared himself "more optimistic" that a deal would be done.

But Germany, leading a bloc of sceptical eurozone nations, said the outcome of crisis talks this weekend was "completely open."

Germany leads a bloc of eurozone nations saying that, after two bailouts over the past five years totalling 240 billion euros, and 107 billion euros in debt forgiveness in 2012, Greece is looking like bottomless money pit.

The possibility of a breakthrough sent stock markets soaring in Europe, Asia and the US on Friday.

Meanwhile the euro briefly rose above $1.12 for the first time in July before falling back slightly in later trade, still up at $1.1152

- Tsipras's gamble -

Eurogroup chief Jeroen Dijsselbloem promised that Eurozone finance ministers will make a 'major' decision Saturday on whether to endorse the latest proposals from Athens.

"We have to make a major decision. Whichever way," Dijsselbloem, who is also the Dutch finance minister, told reporters ahead of a cabinet meeting in The Hague.

"But we have to see whether the proposals will genuinely help pull Greece from the doldrums," he added, two days ahead of a summit of EU leaders on Sunday.

Parliaments in several EU nations, notably Germany, will also have to vote on whether to accept Greece's reform plan in exchange for another huge bailout -- its third in five years.

Tsipras is taking a political gamble by making any concessions to creditors' demands.

Hardliners in Syriza and coalition partner the Independent Greeks have obstinately rejected further austerity.

But although Greek voters last Sunday roundly voted "No" to accepting tough austerity terms for a bailout that expired June 30, they are alarmed at capital controls that have closed banks and rationed ATM cash.

They also overwhelmingly want to keep the euro.

"The government has to find a deal with its European partners no matter what. We didn't vote 'No' to leave the eurozone," said a pensioner in Athens, Nikos Eftekidis.

But another pensioner, Giorgos, said the "government's proposed measures are very tough, I wasn't expecting that. That's not what the Greeks voted for."

Key points from Athens's new bailout plan