The government of Greek Prime Minister Alexis Tsipras drafted a new proposal that it hopes will convince creditors to let the country stay in the euro.
The package of economic reforms and spending cuts, put together with help from France, was approved by a majority of the country’s cabinet ministers.
The proposals are set to be discussed at a summit of European Union leaders Sunday to determine whether the country will get a new bailout or be forced to leave the single currency.
Although the chances of a “Grexit” have climbed, “we continue to see Greece staying in the euro as marginally more likely, not least because the majority of Greeks prefer so,” Deutsche Bank analysts wrote in a note to clients. “Europe is intent on forcing an outcome either way.”
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Market reaction suggested that investors believe a deal can be done or that the European Central Bank can successfully contain the fallout if one isn’t.
Pressure has been mounting on Greece’s creditors to make the country’s debt more manageable, giving it a chance to rebound from a crisis that has erased a quarter of its economy.
“Realistic proposal from Athens needs to be matched by realistic proposal from creditors on debt sustainability to create win-win situation,” European Union President Donald Tusk said in a Twitter post Thursday.
The U.S. wants to see debt sustainability in Greece, State Department spokesman John Kirby told reporters in Washington on Thursday.