ATHENS (Reuters) - Greek Prime Minister Alexis Tsipras appealed to his party's lawmakers on Friday to back a tough reform package after abruptly offering last-minute concessions to try to save the country from financial meltdown.
With creditor institutions due to deliver an initial verdict on Athens' loan request and reform proposals within hours, euro zone partners appeared to be preparing for a deal at the weekend to keep Greece in the euro zone.
After walking into a party meeting to applause, Tsipras tried to rally his Syriza lawmakers behind the new proposals ahead of a snap vote in parliament expected late on Friday. He urged them to help Greece stay with the euro, but he faced some resistance from leftists stunned by his acceptance of previously spurned austerity measures.
"We are confronted with crucial decisions," Tspiras told his party caucus, according to a Greek official.
"We got a mandate to bring a better deal than the ultimatum that the Eurogroup gave us, but certainly not a mandate to take Greece out of the euro zone," he said. "We are all in this together."
The latest reform package was strikingly similar to the terms Greeks rejected in a referendum just last Sunday, angering members of the Syriza's hardline Left Platform wing. Five of them signed a letter saying it would be better to return to the drachma, Greece's pre-euro currency, than to swallow more austerity with no debt write-off.
"The proposals are not compatible with the Syriza program," Energy Minister Panagiotis Lafazanis, who belongs to the far-left faction, told Reuters.
He declined to say how he would vote in the plenary ballot expected late on Friday night. "We will take it step by step."
Even with a rebellion from within his own ranks, Tsipras was assured of backing from opposition lawmakers to carry the vote, but his political position would be weakened. The centrist opposition To Potami party and the main center-right opposition New Democracy said they would support him.
Germany, which has contributed more to bailouts than any other country, sounded wary. A finance ministry spokesman ruled out any debt restructuring that would lower its real value.
France, Greece's strongest supporter in the euro zone, rushed to offer praise. President Francois Hollande called the offer "serious and credible". Eurogroup head Jeroen Dijsselbloem described it as a "thorough piece of text" but declined to go into specifics.
"Broad support in Greece gives it more credibility, but even then we need to consider carefully whether the proposal is good and if the numbers add up," he told reporters. "One way or the other, it is a very major decision we need to take."
The lenders' backing is crucial for euro zone leaders to support the proposals. Dijsselbloem, European Commission President Jean-Claude Juncker, European Central Bank President Mario Draghi and International Monetary Fund head Christine Lagarde discussed the plan in a teleconference.
The euro gained more than 1 percent against the dollar and European markets rallied on the improved prospects for a last-ditch deal to keep Greece in the currency area. Italian, Spanish and Portuguese bond yields fell, reflecting perception of reduced risk.
U.S. Treasury Secretary Jack Lew said Greece and its creditors appeared to be closer to a deal, calling for an adjustment to Athens' debt burden to ease its cash flow.
Greece still has to overcome hardening attitudes toward it among euro zone partners.
Some, including a senior member of German Chancellor Angela Merkel's party, greeted the latest reform proposals with scepticism. Slovakia's finance minister questioned whether the proposals went far enough.
Finance ministers of the 19-nation euro area will meet on Saturday to decide whether to recommend opening negotiations on a third bailout program despite exasperation at the five-year-old Greek crisis. A senior EU official said the meeting would include discussions on whether Greece needs some debt relief.
Greece asked for 53.5 billion euros ($59 billion) to help cover its debts until 2018, a review of primary surplus targets in the light of the sharp deterioration of its economy, and a "reprofiling" of the country's long-term debt.
Any new deal would also have to be endorsed by national parliaments including in Germany.
Estonia's parliament was the first to give the government conditional authorization for loan negotiations with Greece, provided the Commission finds sufficient basis for the talks.
But Lithuanian President Dalia Grybauskaite, whose country is the most recent newcomer to the euro, said the Greek proposal was based on old economic data and would probably not be enough.
A small group of pensioners held a protest outside the finance ministry in Athens and an anti-austerity demonstration is planned for Friday evening. "The new measures are suffocating," said Irini Skordara, 79, one of dozens of pensioners queuing outside a bank to withdraw their pension.
Tsipras has called a snap vote in parliament asking for its backing to negotiate a list of "prior actions" - measures his government would take to convince creditors of its intent ahead of negotiations and to secure the first disbursement.
Former Finance Minister Yanis Varoufakis, who alienated many euro zone partners with his outspoken lectures, said in a statement he supported the effort to renegotiate Greece's debt but was unable to attend parliament "for family reasons".
The latest offer includes defense spending cuts, a timetable for privatizing state assets such as Piraeus port and regional airports, hikes in value added tax for hotels and restaurants and slashing a top-up payment for poorer pensioners.
"The 'No' in the referendum appears to be turning into a 'Yes' from Tsipras," Commerzbank analyst Markus Koch said.
Greek banks have been closed since June 29, when capital controls were imposed and cash withdrawals rationed after the collapse of previous bailout talks. Greece defaulted on an IMF loan repayment and now faces a critical July 20 bond redemption to the ECB, which it cannot make without aid.
The country has had two bailouts worth 240 billion euros from the euro zone and the IMF since 2010, but its economy has shrunk by a quarter, unemployment is at more than 25 percent and one in two young people is out of work.
"The prime minister seems to have made the right choice between his party and the interest of Greece," an editorial in the center-right daily Kathimerini said.
"His decision to accept a tough package of measures will ensure the country stays in the euro. This is not the time for gripes and assessing the damage, what's most important is securing the country's interests and its place in the euro zone."
Reporting by Renee Maltezou, George Georgiopoulos, Marius Zaharia, Alastair Macdonald, Caroline Copley, Georgia Kalovyrna, Anthony Deutsch, Toby Sterling, Julien Ponthus; Writing by Matthias Williams; Editing by Paul Taylor, Peter Graff, Anna Willard, Philippa Fletcher