More hope for Greece bailout deal

"We are advancing toward an agreement," said President Francois Hollande of France. But the gap separating what Greece wants to yield in painful reforms and what creditors are demanding before providing more funds remained sizeable.

"We are closer than we ever were before," said European Commission president Jean-Claude Juncker.

International Monetary Fund managing director Christine Lagarde said that despite the improvements in the Greek offer "it still lacks specificity. And it is still short of everything that we expected".

Uncertainty over Greece has sapped confidence in global markets, particularly in Europe, and threatened the financial future of Greeks.

"I want to end this political gambling," EU president Donald Tusk told reporters in Brussels.

In the Greek government's compromise proposal, Mr Tsipras is offering about €8 billion in higher taxes and austerity measures over the next two years - several of which go against his election commitments - as he sought a belated compromise with Greece's creditors.

"The ball is in the court of the European leadership," he said.

Mr Tusk said Greece's plans "were the first real proposals in many weeks".

Jeroen Dijsselbloem, the Dutchman who chaired an emergency meeting of eurozone finance ministers ahead of the summit, said "it's an opportunity to get that deal this week".

Greece needs the money urgently as it faces a June 30 debt repayment it cannot afford.

Leaders are now looking at a two-day EU summit starting on Thursday in Brussels to make the final thrust in the talks and reach a deal that will keep Greece solvent. Finance ministers will meet again on the eve of the summit.

Numerous deadlines for Greece to propose more reforms have come and gone, with the country living hand to mouth in the meantime. But Mr Hollande said it was "better to take a few days, but get to an agreement".

German chancellor Angela Merkel agreed, saying: "There are still a lot of days left to come to a decision."

The more co-operative spirit gave a boost to stock markets. Athens shares closed 9% higher. The Stoxx 50 index of top European shares was somewhat less volatile and closed up 4.1%.

The need for a deal could not be more pressing. Greece must pay €1.6 billion to the IMF in just over a week. Further payments are due in July and August.

A debt default by Greece could destabilise its banks - Greeks are already withdrawing increasingly large amounts of money - and could in a worst case scenario cause the country to have to leave the euro.

That would be hugely painful for Greeks but experts are more divided about its effects on Europe and the world economy. Several European countries have said publicly they are getting prepared for the possibility.

Greece's proposal for additional taxes on businesses, basic goods and middle-income households was aimed at easing pressure from lenders to slash pensions and wages after six years of recession but was expected to dash hopes of a financial recovery this year.

Athens will make tougher rules on early retirement and shift some categories of goods to a higher sales tax bracket, including hotels and certain foods. Emergency bailout taxes that had been imposed will remain, even though Mr Tsipras had pledged to phase them out.

A Greek government official said employers will have to contribute higher social security contributions to pension and unemployment funds. He said there would also be a special one-off tax for profitable businesses.

Despite the more upbeat mood in markets, tension was palpable in Greece, where people have flocked to cash machines to withdraw money.

To support Greek banks in the face of growing money withdrawals, the European Central Bank increased the amount of emergency credit it allows the banks to draw on.