Greece took a step back from the abyss today with the presentation of new budget proposals that euro zone leaders welcomed as a basis for a possible agreement in the coming days to unlock frozen aid and avert a looming default.

European Council President Donald Tusk, who chaired an emergency summit of leaders of the 19-nation currency bloc, called the Greek proposals "a positive step forward". He said the aim was to have the Eurogroup finance ministers approve a cash-for-reform package on Wednesday evening and put it to euro zone leaders for final endorsement on Thursday morning.

"I am convinced that we will come to a final agreement in the course of this week," European Commission President Jean-Claude Juncker told a late-night news conference.

German Chancellor Angela Merkel, whose country is Greece's biggest creditor, was more cautious. "I can't give any guarantee that that will happen," she said of a final agreement. "There's still a lot of work to be done."

The Greek proposals included higher taxes and welfare charges and steps to curtail early retirement, but not the nominal pension and wage cuts first sought by lenders. Leftist Prime Minister Alexis Tsipras, elected in January on a promise to end austerity measures, also appeared to have avoided raising value added tax on electricity or loosening job protection laws.

The cash-starved country must repay the IMF 1.6 billion euros by June 30 or be declared in default, potentially triggering a bank run and capital controls.

Prime Minister Joseph Muscat, who attended the summit, said the meeting was a positive step forward. Although the summit had not taken decisions, it had helped move things forward on reforms by the Greek government for financial sustainability including cost cutting and taxation. 

He said talks were not moving towards a haircut of Greek debt but rather an extension of the maturity of the loans, extension of the grace period during which no interest would be paid, and a change in the coupon rate.