By Karolina Tagaris and Alastair Macdonald
ATHENS/BRUSSELS (Reuters) - A new Greek offer for a cash-for-reforms deal raised hopes of an agreement as euro zone leaders prepared for an emergency summit on Monday, with EU officials welcoming the proposals as a "good basis for progress" to avert a default by Athens.
European shares surged and the Greek stock market jumped nearly 7 percent on hopes that the government could finally end months of wrangling that have left the country on the verge of bankruptcy and possibly being pushed out of the euro bloc.
In a sign of the more positive mood music, EU Economic Commissioner Pierre Moscovici said he was "convinced" that euro zone leaders would find a resolution on the basis of the latest proposal by Greek Prime Minister Alexis Tsipras.
The contents of the new offer have not yet been officially divulged, but Greek officials say it acquiesces to some of the demands from Greece's EU and IMF lenders for tax hikes, curbing early retirement and other spending cuts to ensure Athens hits budget targets.
In Brussels, European Union officials said Greece is offering to raise the retirement age gradually to 67 and make value-added tax reforms. A final deal was unlikely on Monday, but this could be a step toward an agreement in the coming days, they added.
Greece must repay a 1.6 billion euro loan to the International Monetary Fund next week but is likely to default without a deal with its creditors.
Tsipras heads into a series of talks with figures including European Central Bank President Mario Draghi and IMF head Christine Lagarde before the summit in Brussels of euro zone government heads at 7 pm.
Underlining the urgent need for a deal on Monday, Greece's central bank last week warned lenders to brace for a "difficult day" on Tuesday if the summit ended without a breakthrough, banking sources have told Reuters.
The country could be forced to impose capital controls within days to stem the outflow of billions of euros from banks by savers fearing they could be stuck with a sharply devalued new currency should Greece be forced out of the euro.
"We are moving in the right direction, we have solid ground for a deal, we just have to consolidate that today," Moscovici told Europe 1 radio, adding Monday would be "decisive". "I think that the political will of everyone to preserve the euro, this common good, to ensure that this single currency is irreversible, will win the day."
There were no immediate long queues or signs of panic outside Greek banks in the capital on Monday. The ECB, which has kept local lenders afloat with infusions of liquidity, raised its emergency funding once more.
"I believe there will be a deal today. This is a normal visit to the bank," said one Greek saver outside a bank branch.
An exit from the euro would create economic dislocation in Greece and severe consequences for its banks' liquidity and solvency, which could lead to the banking system being nationalized, credit ratings agency Moody's warned in a report on Monday.
TAX-EVADING BILLIONAIRES
Comments by Greek Deputy Labor Minister Dimitris Stratoulis on a morning news show underscored the tightrope Tsipras must walk to reach an agreement that will win over both the creditors and his own leftist Syriza party.
"We are not afraid of blackmail, and our priority is the public interest," Stratoulis, a Syriza hardliner, told Antenna television. "Let's see if there will be a deal tonight."
Syriza stormed to power in January promising to roll back years of austerity it says has worsened Greece's plight. Thousands gathered in central Athens on Sunday to protest against a new round of cuts, which is expected to be countered by a demonstration in favor of staying in the euro later on Monday.
The mood had also hardened among the creditors in recent weeks. Chancellor Angela Merkel of Germany, which has spent more money bailing out Greece than any other country, is under pressure from taxpayers, business leaders and within her own ranks not to go soft on Greece.
"The Greek government needs to finally do something," German Economy Minister Sigmar Gabriel told the mass-selling German newspaper Bild. He added he was sure Merkel would "not sign anything which allows Greek billionaires to continue evading taxes and mean that workers and pensioners in Germany have to pay even more as a result".
The chief-of-staff of European Commission President
Jean-Claude Juncker had spoken of a "forceps delivery" as officials worked late into the night on Sunday to produce a deal before the emergency summit.
European ministers had earlier played down the prospect of a final agreement on Monday but hope a political understanding can be reached in time for a full deal by the end of June.
"Lithuania's position is quite strict ... we see a state which wants to be able to feast, and it wants for all others to pay for that feast," Lithuania's president Dalia Grybauskaite told public radio. "Greece is trying to make others help them, but they don't expect to take any responsibility at all."