Greek Prime Minister George Papandreou headed into crunch eurozone talks Friday hoping to clinch a new bailout deal to save his nation from default after a positive EU-IMF review of its public finances.
As Papandreou met Jean-Claude Juncker, the Luxembourg premier who heads the eurozone finance ministers, Athens announced that a four-week audit of its finances by EU and IMF experts had concluded satisfactorily.
"Today the Greek government's talks with the representatives of the European Commission, the European Central Bank and the International Monetary Fund concluded in a positive manner," the Greek finance ministry said.
After weeks of tough talks to save Greece from bankruptcy, the ministry said the two sides discussed a four-year programme to reduce the Greek public deficit and its debt of some 350 billion euros ($504 billion) through further reform and a sweeping, controversial privatisation drive.
The EU, IMF and ECB, which bailed out Greece last May, made these commitments a condition of extending further aid from the 110-billion-euro rescue package.
Facing mounting pressure from European partners to redouble efforts to stabilise its finances, Athens simultaneously faces growing protests at home.
As Papandreou readied to cut a deal, trade unionists occupied the finance ministry and called for a general strike to fight the series of spending cuts and tax hikes which have triggered recession and many layoffs.
Demands for renewed efforts from Greece have been at the centre of four weeks of tortuous talks between Athens and the EU, ECB and IMF 'troika,' whose experts have been poring over Greece's books.
The troika is due to issue its official findings on the state of the Greek economy, probably also on Friday.
At stake for Greece was a fifth 12-billion-euro tranche of last year's bailout, which Athens has said it needs to pay bills falling due next month.
As the troika talks continued, there has been mounting speculation that Greece needed and would get second bailout of up to 70 billion euros ($100 billion) on top of the existing rescue loan.
A severe recession has slowed Greece's efforts to balance its books and while the original bailout anticipated it returning to the market next year to refinance a major portion of its debt, that prospect appears all but impossible now.
Greece has announced a 50-billion-euro privatisation drive, including major companies such as the country's main telecoms and electricity operators.
Some European countries felt it has moved too slow on the asset sales and have pushed for an acceleration but the programme of sell-offs has caused massive outrage at home.
Athens has also come under pressure to improve its poor record of collecting taxes.
Last month, Athens pledged to beef up austerity measures to the tune of 6.5 billion euros in 2011 and 22 billion between 2012 and 2015 -- bringing the public deficit to 7.5 percent of Gross Domestic Product in 2011 and one percent by 2015, well below the EU's 3.0 percent limit.
There has also been mounting talk that a second bailout would include a rollover of Greece's debt under which creditor banks would buy new bonds from Athens to replace maturing securities, thereby ensuring continued financing.
The ECB, which has been the most opposed to any restructuring of Greece's debt as it fears repercussions throughout the eurozone, has signalled it might support such a move provided credit ratings agencies would not consider it a default.
Standard and Poor's Corp, one of the top three ratings agencies, said Friday that if the terms of a debt swap matched exactly "the original obligation that it is hard to discern any shortfall (in returns), we would likely not characterize such an offer as a default."
However, if an exchange offer means that the issuing country pays its creditors less than originally set down, by extending the maturity of its debt for example, then that would constitute a default, S&P warned.