Greece said Wednesday it was "optimistic" it would resolve the bailout crisis by meeting the demands of both the electorate and creditors with its proposal for a loan extension, despite EU scepticism.
Greek Finance Minister Yanis Varoufakis insisted a deal was still possible even after a firm preemptive "nein" from EU paymaster Germany to its planned offer, which has reawoken the spectre of a catastrophic "Grexit".
"We are on the right path, I am optimistic it will end well tomorrow or the next day," Varoufakis told reporters.
"Our proposition will be written in such a way that it will cover both the demands of the Greek side and the head of the Eurogroup," he said.
After Greece said it was looking to request a loan extension from the eurozone without strings attached, warnings flooded in from the EU and US over the perils of losing valuable time with proposals that were doomed to fail.
Athens was expected to send a letter to Jeroen Dijsselbloem, head of the Eurogroup of EU finance ministers, on Thursday to request an extension of up to six months on its European loan agreement that would sidestep the duties of a full-blown bailout.
As the clock ticked down to a Friday deadline set by Dijsselbloem, US Treasury Secretary Jacob Lew called Varoufakis to urge him to work on a deal based on the existing bailout agreement.
He told him "failure to reach an agreement would lead to immediate hardship in Greece, that the uncertainty is not good for Europe, and that time is of the essence," the Treasury said.
- 'Common ground' -
The European Commission's vice president for the euro, Valdis Dombrovskis, said efforts were under way to forge a compromise by finding "common ground for an extension of the current programme".
He insisted that "the best way forward is to extend the existing programme with its conditionality."
But Prime Minister Alexis Tsipras's ruling party has refused time and again to do just that, insisting the conditions laid out in an original agreement made with the former conservative government were strangling the economy.
Fitch ratings agency said Greece's credit rating was at risk due to "continued brinkmanship in the negotiations," and warned creditors will be reluctant to set a precedent for giving aid without "appropriate conditionality."
A spokesman for German Finance Minister Wolfgang Schaeuble had earlier said any extension of international loans was "inextricably" linked to reforms agreed by Athens under its 240-billion-euro ($270-billion) bailout.
Schaeuble himself said he would "not speculate on discussions and negotiations we'll have in the coming days."
Europe and Greece are racing to reach a deal to avoid a Greek exit from the eurozone -- dubbed a "Grexit" -- after talks in Brussels ended in acrimony on Monday with both sides digging in their heels.
With the European portion of the bailout expiring at the end of February, Greece's creditors insist it needs extra financing to stave off the risk of a default and exit from the euro.
- 'Simply a non-starter' -
EU Economics Commissioner Pierre Moscovici told Belgian radio Bel RTL there were "margins for manoeuvre," saying it was "very important we make all the necessary efforts to avoid a rupture which would be damaging for both parties".
The olive branch lies in the wording: Greece's ruling Syriza party had sworn it would not apply for a bailout extension but a bridging loan -- the word bridge has now been dropped, while extension is back on the table.
The Athens move "comes with a snag," Berenberg analyst Holger Schmieding said: "It wants the money but rejects many of the strings attached to it. That is simply a non-starter."
Schaeuble has accused Athens of wanting something for nothing and has urged Tsipras to "tell the Greeks the truth: there is no fast way out."
- Emergency funding -
Greece's parliament elected pro-European Veteran conservative Prokopis Pavlopoulos as president late Wednesday in a bid to draw much-needed cross-party support to the debt negotiations.
It was parliament's failure to agree on a candidate at the presidential election in December which sparked early elections in January that ushered in the radical left Syriza party.
The chaos surrounding the debt talks has alarmed analysts, with economists at Commerzbank now predicting that a Greek exit from the euro was 50 percent likely.
But in good news for Greece, the European Central Bank decided to extend and increase the amount of emergency liquidity available to Greek banks, according to a bank source.
The ceiling for emergency assistance to Greek commercial banks had been raised to 68.3 billion euros ($77.5 billion) from 65 billion euros previously, the source said.