Optimism grew on Friday that Greece has finally done enough to secure a second bailout despite worsening relations with Germany, but doubts remained over lenders' demands for tighter supervision of how Athens will implement the deal.
Greek officials say they have done everything asked of them for euro zone finance ministers to sign off on the 130 billion euro rescue package on Monday -- a month before Athens needs the money to make 14.5 billion euros of debt repayments due on March 20 or go bankrupt.
Late on Thursday, the government set out extra budget savings sought by the EU and International Monetary Fund to secure the funds.
"We are almost there," one euro zone official said.
The euro pushed off three-week lows and German government bonds opened lower as investors cut back exposure to relatively safer low-yielding assets on bets that Greece will secure the financial lifeline when euro zone finance ministers meet in Brussels on Monday.
But not everything had been decided, and efforts to find a solution have aroused acrimony between Athens and Berlin, with German Finance Minister Wolfgang Schaeuble likening Greece to a "bottomless pit".
Northern states in the currency union, led by paymaster Germany, are particularly doubtful that Greek political leaders will stick to the savage cuts in wages, pensions and jobs prescribed by its lenders after an election expected in April.
"The scepticism is especially strong among the AAA states over whether Greece will be able to make it," Germany's Der Spiegel magazine quoted Austrian Finance Minister Maria Fekter as saying of countries with top-notch credit ratings such as Germany, Finland and the Netherlands.
"The risk of a Greek insolvency is not off the table."
German officials said they wanted greater external oversight of the measures Greece is taking to cut its huge debt, and an escrow account to ringfence funds for debt payments.
That could further raise hackles in Athens, where Public Order Minister Christos Papoutsis warned on Thursday that the euro zone approach amounted to "sheer blackmail".
A chaotic Greek default next month would send shockwaves through the euro zone, but there are growing signs that some members believe the single currency area is better placed now to survive the impact.
In a further sign of an emerging agreement, euro zone sources said national central banks in the currency bloc would exchange holdings of Greek bonds this weekend in the run-up to a private sector debt deal to avoid taking forced losses.
With a go-ahead from the Eurogroup ministers, Greece can formally launch a debt restructuring offer to its private creditors which aims to halve the face value of what Greece owes the investors, slashing its debts by 100 billion euros.
"There is no certainty but there is cautious optimism," Antonis Samaras, leader of Greece's conservative New Democracy party and the favourite to win the elections, told reporters.
French Prime Minister Francois Fillon cautioned Europe on Friday it should not "play with the default of Greece".
"The Greeks have promised very important reforms," he told RTL radio. "The Europeans now have to keep their commitments."
Differences in Berlin?
Asked if there was a difference of opinion within Germany, Fillon said: "There is no divergence with the Chancellor, who absolutely shares our positions, but we hear people sometimes in Germany express difference opinions ... within the German government."
Greek anger has shifted in recent days from German Chancellor Angela Merkel to her finance minister, Wolfgang Schaeuble, who in Greek eyes appears to have strayed from economic matters into the political, and even electoral process.
On Wednesday Schaeuble noted Italian parties gave technocrat Prime Minister Mario Monti a year to push through reforms.
In Athens those comments were interpreted as a suggestion to delay the Greek elections to allow technocrat Prime Minister Lucas Papademos - who has been in power only since November - more time to implement promised budget cuts and reforms.
This brought a tart response from government spokesman Pantelis Kapsis. "I have nothing to say in response to Mr. Schaeuble - it is absolutely up to Greece when to hold elections," he told reporters.
Kapsis confirmed Athens expected to win approval from the Eurogroup on Monday for the debt swap deal, under which the real value of bonds held by banks and insurers will fall by about 70%.
Greek government sources said Athens had agreed with its lenders on how to fill a 325 million euro hole in a set of 3.3 billion euros in budget cuts adopted by parliament on Monday as rioters torched and looted buildings across the capital in the worst unrest since 2008.
Two sources said 100 million euros would come from defence cuts, about 90 million by bringing forward some public sector wage reductions and 135 million would be taken from the health, labour and interior ministries.
Euro zone finance ministers must also consider on Monday a report by the European Commission, the European Central Bank and the International Monetary Fund which predicts Greek debt will be around 129% of GDP in 2020, well above a target of 120% set in October.
Several officials have said a target of 125% would be acceptable to most euro zone members - and possibly also to the IMF - but measures will be needed to get it somewhat lower.
Ideas include the euro zone cutting the interest rate on its existing bilateral loans to Greece; increasing its current offer of 130 billion euros of government financing; and asking private investors to agree to bigger losses.
A further option is for the ECB to forego profits on Greek bonds it holds in its portfolio and to re-sell them to the euro zone's bailout fund, the European Financial Stability Facility (EFSF), at the same discount it bought them on the market.
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