BRUSSELS (Reuters) - Greek Prime Minister Alexis Tsipras held a new round of late-night talks with the leaders of Germany and France and agreed to intensify negotiations with Athens' creditors ahead of a looming default at the end of the month.
The latest in a run of sleep-defying meetings in recent weeks was partly political theater, as all involved try to show their commitment to a deal - and avoid any blame for failing to avert a crunch that could unsettle the euro and the world economy. But Tsipras again said he saw a solution at hand.
As ratings agency Standard & Poor's downgraded Greek bonds deeper into junk status, questioning whether Athens can pay its debts, the leftist leader emerged early on Thursday from talks on the sidelines of a summit in Brussels with Chancellor Angela Merkel and President Francois Hollande to express confidence.
"We decided to intensify the efforts to bridge the remaining differences and proceed, I believe, to a solution in the coming period," said Tsipras, whose first five months in government have brought Greece to the brink of defaulting on payments to the IMF if it fails to secure new EU funding within three weeks.
Merkel had made it clear before the meeting, however, that it was not her and Hollande with whom he must negotiate but with the three institutions representing sovereign creditors - the European Union, European Central Bank and International Monetary Fund. There was no change in that line afterwards:
"It was agreed unanimously that the talks between the Greek government and the institutions should be pursued with great intensity," a German government spokesman said in a statement that described a meeting conducted in a constructive atmosphere.
The chairman of euro zone finance ministers said a cash-for-reform deal with Athens was still possible in time for their June 18 meeting, with just a few issues remaining to be solved, but Greek counter-proposals were not yet satisfactory.
Tsipras, elected in January on a platform to end years of creditor-imposed austerity, again stressed his demand for a "political" solution to the crisis. But Merkel and Hollande, speaking for other creditors, insist the place to negotiate is the Brussels Group of technical experts who would then seek political endorsement from the Eurogroup of finance ministers.
"I believe Europe's political leadership realizes that we must offer a viable solution to Greece and the possibility to return safely to growth with social cohesion and with a sustainable debt," Tsipras said, renewing a call for a reworking of Athens' debts that the EU says can come only after a deal.
The talks have been deadlocked over Greece's rejection of the creditors' demands for cuts in pensions and unpopular labor market reforms as conditions for releasing frozen bailout funds.
Greece will be in default at the end of June without fresh funds to let it to repay 1.6 billion euros to the IMF. It put off a smaller repayment earlier this month under a rarely used IMF rule allowing it to combine all payments due in any month.
It was the fifth conversation among the three leaders in less than two weeks, highlighting the seriousness of efforts to prevent a breakdown that could force Greece out of the euro zone, raising doubts about the irreversibility of the 16-year-old currency and unsettling global financial markets.
But officials played down the extent to which Merkel and Hollande were prepared to go into the substance of negotiations.
Before the talks, Merkel stressed that while they want to keep Greece in the 19-nation single currency area, that required it to conclude technical talks: "The message will be: you've got to continue negotiations with the three institutions," she said.
A German spokesman dismissed as "pure invention" a media report that Merkel might agree to a deal if Greece committed to at least one major economic reform sought by the creditors.
While both sides may be holding out to see if the other blinks first, time is running out and Tsipras faces pressure not just from left-wing hardliners but also from Greek voters, most of whom say they want to remain in the euro zone.
A poll showed a slight rise since April in the number who are dissatisfied with Tsipras's negotiating performance with the creditors, reaching 53.4 percent from 50.5 percent.
European Commission President Jean-Claude Juncker, who accused Tsipras on Sunday of misrepresenting the creditors' proposals and misleading his parliament, had a brief meeting with the Greek leader and agreed to resume talks on Thursday.
"For this final push, the Commission is of the view that the ball is now clearly in the court of the Greek government," spokesman Margaritis Schinas told a news conference.
Tsipras has denounced creditors' demands to scrap an income top-up for the poorest pensioners and to refrain from unilateral moves to reintroduce collective bargaining or raise the minimum wage - policies that are anathema for his leftist Syriza party.
Brussels says he is free to put forward alternative measures provided the numbers add up to deliver a small primary budget surplus before debt service payments.
In a further complication, a Greek court ruled that the government should reverse cuts to private sector pensions it made in 2012 as a condition of its bailout agreement because the reductions deprived pensioners of the right to a decent life.
Reporting by Alastair Macdonald; Editing by Ken Wills