By Renee Maltezou and John O'Donnell
ATHENS/FRANKFURT (Reuters) - The Greek government sent a package of reform proposals to its euro zone creditors on Thursday in a race to win new funds to avert bankruptcy and will seek a parliamentary vote on Friday to endorse immediate actions.
The chairman of Eurogroup finance ministers, Jeroen Dijsselbloem, confirmed receiving the documents and said through a spokesman that he would not comment until they had been assessed by experts from the European Commission, European Central Bank and International Monetary Fund.
A Greek official said lawmakers would be asked to authorise the leftist government to negotiate a list of "prior actions" it would take before any fresh aid funds are disbursed, a key step to convince sceptical lenders of its serious intent.
Leftist Prime Minister Alexis Tsipras spent the day with his cabinet drafting a last-ditch package of tax rises, pension reforms and economic liberalisation measures on which Greece's survival in the euro zone hinges.
A further vote would be needed to turn them into law next week if euro zone leaders agree at a summit on Sunday that the proposals are a basis for starting negotiations on a three-year loan and releasing some bridging funds to keep Greece afloat.
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 the following day 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 International Monetary Fund since 2010, but its economy has shrunk by a quarter, unemployment is more than 25 percent and one in two young people is out of work.
Germany, Athens biggest creditor, meanwhile made a small concession by acknowledging that Greece will need some debt restructuring as part of the new programme to make its public finances viable in the medium-term.
The admission by hardline German Finance Minister Wolfgang Schaeuble came hours before the midnight deadline for Athens to submit its reform plan.
Schaeuble, who makes no secret of his doubts about Greece's fitness to remain in the currency area, told a conference in Frankfurt: "Debt sustainability is not feasible without a haircut and I think the IMF is correct in saying that.
But he added: "There cannot be a haircut because it would infringe the system of the European Union."
He offered no solution to the conundrum, which implied that Greece's debt problem might not be soluble within the euro zone.
But he did say there was limited scope for "reprofiling" Greek debt by extending loan maturities, shaving interest rates and lengthening a moratorium on debt service payments.
Schaeuble also complained that he had not seen any sign of "prior actions" by the Greek government. Friday's vote should go some way towards disarming such criticism, although a further vote will be required to turn the "prior actions" into law next week if an agreement is reached, the Greek official said.
DEBT RELIEF CHORUS
European Council President Donald Tusk, who will chair an emergency euro zone summit on Sunday to decide Greece's fate, joined growing international calls for Athens to be granted some form of debt relief as part of any new loan deal.
Tusk said a realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors.
"Otherwise, we will continue the lethargic dance we have been dancing for the past five months," he said.
Failure to reach a deal on Sunday, including releasing some money to enable Athens to cover debt service over the next few weeks, could lead to a collapse of Greek banks next week.
If there is no agreement, all 28 European Union leaders will discuss measures to limit the damage from a Greek collapse, including humanitarian aid, possible border controls and steps to mitigate the impact on neighbours, EU officials said.
Just how uncertain the coming days are was highlighted when
ECB President Mario Draghi voiced highly unusual doubts about the chances of rescuing Greece.
Italian daily Il Sole 24 Ore quoted the ECB chief, under growing fire in Germany for keeping Greek banks afloat, as saying he was not sure a solution would be found for Greece and he did not believe Russia would come to Athens' rescue.
Asked if a deal to save Greece could be wrapped up, Draghi said: "I don't know, this time it's really difficult."
The ECB is keeping shuttered Greek banks afloat with emergency liquidity capped until the weekend.
Even France, Greece's strongest supporter in the euro zone, acknowledged it was working on scenarios for a Greek exit from the currency area if weekend efforts to clinch a deal fail.
Under the agreed timetable, the three creditor institutions will deliver their initial assessment by Friday evening. If it is broadly positive, Eurogroup finance ministers will decide on Saturday whether to recommend opening negotiations with Athens on a conditional loan from the European Stability Mechanism bailout fund. The decision requires the assent of countries representing 80 percent of the ESM's capital, so talks can go ahead even if one or two smaller member states vote against it.
Having won a thumping referendum majority to reject the austerity terms of a previous bailout plan, fired his turbulent finance minister and secured support from opposition party leaders, Tsipras is in a stronger position to impose tough measures and face down resistance at home.
But in a sign of the some of the challenges he will face, the leader of the far-left wing of his Syriza party came out to denounce any imposition of harsh measures on Greeks.
"We don't want add to the past two failed bailouts a third bailout of tough austerity which will not give any prospects for the country," Energy Minister Panagiotis Lafazanis said.
According to Athens daily Kathimerini, the reform package will be worth 12 billion euros over two years, more than previously planned to offset a return to recession after months of difficult negotiations with creditors.
Instead of growing by 0.5 percent this year, months of uncertainty and almost two weeks of capital controls mean "there are estimates of a recession of about 3 percent", Kathimerini said. Greece emerged only last year from a deep recession that shrank its economy by a quarter over six years.
European officials told Reuters on Wednesday that some large Greek banks may have to be shut and taken over by stronger rivals as part of a restructuring of the sector that would follow any bailout of the country.
One official said Greece's four big banks - National Bank of Greece
German Bundesbank chief Jens Weidmann said capital controls should remain in force in Greece until there was any deal, and that the ECB should not increase its liquidity assistance for Greek banks, without which they may collapse next week.
(Additional reporting by Alastair Macdonald in Brussels, Agnieszka Flak in Milan, Deepa Babington, Angeliki Koutantou and Michele Kambas in Athens, Balasz Koranyi and Frank Siebelt in Frankfurt, Julien Ponthus and Laurence Foster in Paris; Writing by Paul Taylor; Editing by Catherine Evans, Toni Reinhold)
