By Renee Maltezou and Jan Strupczewski
ATHENS/BRUSSELS (Reuters) - Leftists in Prime Minister Alexis Tsipras' party vented fury on Thursday at terms proposed by Greece's creditors for a last-ditch deal to stave off bankruptcy and European officials acknowledged that large gaps remain to be bridged.
Tsipras emerged from late-night talks with senior EU officials in Brussels saying a deal with international lenders was "within sight" and that Athens would make a crucial payment due to the International Monetary Fund on Friday.
But he rejected pension cuts and a tax rise on electricity that he said European and IMF creditors were demanding along with other conditions to win the release frozen loans and avert a default that could hit euro zone and world markets.
Sources familiar with the creditors' five-page plan said it also asked Athens to commit to selling off state assets and maintaining unpopular labour reforms -- demands that would cross the ruling Syriza party's declared red lines.
The lenders were demanding that Greece reduce spending on pensions by 1 percentage point of gross domestic product and raise a further 1 percent or 1.8 billion euros ($2 billion) by increasing value-added tax on products ranging from drugs to electricity, the sources told Reuters.
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European Commission President Jean-Claude Juncker, who put the proposal to Tsipras at a late-night dinner along with the chairman of euro zone finance ministers, Jeroen Dijsselbloem, said they had made some progress but it was not sufficient.
Dijsselbloem said the meeting that ended after midnight had narrowed down the remaining issues but differences were "still quite large" and Athens was expected to present alternatives to some of the lenders' proposals within days.
An EU source said Tsipras could return to Brussels for further talks as soon as late Friday night, possibly along with top IMF and ECB officials.
A Greek official said Tsipras would brief parliament on the state of the negotiations in Athens at 1500 GMT on Friday.
Time is running out to clinch a cash-for-reforms deal and get disbursements approved by euro zone national parliaments before the 240 billion-euro EU/IMF bailout programme expires at the end of June.
In one concession, the lenders were offering to unlock 10.9 billion euros in unused bank bailout funds that would enable Greece to cover its financial needs through July and August - more than the 7.2 billion euros left in the expiring bailout.
MERKEL FORCES PACE
German Chancellor Angela Merkel, the EU's most powerful leader, has been forcing the pace, at least partly to avoid a meeting of Group of Seven leaders she will host in Bavaria from Sunday turning into another emergency summit on the euro zone. A German spokesman said Tsipras would not be invited to the G7.
Merkel said she had no indication that the IMF wanted to pull out of the Greek talks when asked about German media speculation that the global lender would have to withdraw because of its strict rules on debt.
A Greek government official told reporters that Athens hoped to wrap up the talks by June 14, leaving just enough time for parliaments in Germany and elsewhere to approve the plan. He also said Greece aimed to incorporate more elements of its own rival document in a final agreement.
As partial details of the lenders' proposal leaked out, members of Tsipras' government and his Syriza party denounced the conditions as unacceptable.
The backlash highlighted the risk of a revolt in Syriza if the prime minister decides he has to accept the deal, not least because a big majority of Greeks want to stay in the euro zone.
"(Juncker) took on the dirty work and conveyed the most vulgar, most murderous, toughest plan when everyone hoped that the deal was closing," Alexis Mitropoulos, a deputy parliament speaker and senior official within Syriza told Mega TV. "And that at a time when we were finally moving towards an agreement we all want because we rule out a rift leading to tragedy."
Avgi, the Syriza party newspaper headlined Thursday's edition: "A continuation of austerity? No, thanks!".
Some lawmakers in the ruling party have said Tsipras could call early elections or a referendum if he had to accept a deal that crossed Syriza's "red lines".
Conservative opposition leader Antonis Samaras, who led the government that implemented much of Greece's tough bailout before being defeated in January, urged Tsipras not to call elections but to seek a national consensus on the negotiations.
COMPROMISE
With Europe's big powers, and the United States, concerned about the unpredictable outcome as Greek reserves shrink toward zero, the creditors also showed some willingness to compromise by lowering the budget surplus that Athens will be required to run before debt service payments.
Sources familiar with the proposal said they now sought a primary surplus of 1 percent of gross domestic product this year and 2 percent next year. Greece has offered 0.8 percent this year and 1.5 percent in 2016. However, since the Greek economy has fallen back into recession, lowering tax revenues, the lower target will still require painful retrenchment.
Tsipras, elected in January vowing to end austerity, secured a four-month extension of the bailout package in February.
"I believe an agreement is in sight," he said after the talks with Juncker. "But we need to conclude the discussions with a realistic point of view.
"We are very close to an agreement on the primary surplus. That means all sides agree to go further without tough austerity measures of the past," he added.
But he also ruled out scrapping an income supplement for the poorest pensioners or a value-added tax change that he said would raise the tax on electricity by 10 percentage points.
Juncker, whose institution is not itself a creditor, has been active in trying to broker a deal and has ruled out Greece leaving the euro zone, an outcome many EU officials fear would undermine the long-term stability of the currency.
Euro zone finance ministers, wary of their own voters who are fed up with bailing out Greece, are keen to avoid Athens exploiting divisions between hawks and doves among negotiators.
(Additional reporting by Deepa Babington, Karolina Tagaris and George Georgiopoulos in Athens, Alastair Macdonald and Foo Yun Chee in Brussels; Writing by Paul Taylor; Editing by Crispian Balmer)