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German Chancellor Angela Merkel pressed the Greek government to accept a "generous" offer made by creditors, as Prime Minister Alexis Tsipras lamented the terms demanded in return for aid.
Euro-area finance ministers are due to meet on Saturday to try and hammer out an agreement with Greece, armed with a proposal by creditors to unlock as much as euro 15.5 billion ($17.3 billion) and extend Greece's program through November.
The euro dropped after the state-run Athens News Agency reported the government had rejected the offer, saying the financing was inadequate and a deal couldn't recycle a "vicious cycle of austerity." Greek government spokesman Gabriel Sakellaridis wasn't immediately available for comment.
Nerves are fraying after a week of frenetic discussions in Brussels that will culminate in what Merkel described as a "decisive" meeting to end a five-month standoff with Greece. Negotiations will continue overnight and a Greek decision won't be made until Saturday, according to an European Union official who asked not to be named because the talks are private.
"We are all of the opinion that the offer is very generous," Merkel told reporters after a European Union summit ended in Brussels on Friday. "Now one can only hope that the internal processes on the Greek side lead to all involved in the negotiations finding a solution tomorrow."
Prior actions
With Greece's bailout set to expire in four days, the offer made by the three creditor institutions is dependent upon the Greek government first implementing certain economic steps, according to a copy of the proposal obtained by Bloomberg News. So-called prior actions are required in areas including pensions and sales-tax rates - sticking points that finance chiefs still need to resolve.
On the summit's sidelines, Tsipras told Merkel and French President Francois Hollande that his government couldn't understand why creditors insisted on harsh austerity measures, according to a Greek government official.
Tsipras, who has been negotiating all week in Brussels, said he'll defend the EU's founding principles of "democracy, solidarity, equality, mutual respect" as he pursues an accord. "These principles were not based on blackmails and ultimatums, and especially in these crucial times no one has the right to put in danger these principles," he told reporters.
The euro fell 0.6 percent to $1.1139 as of 4:01 p.m. in London after the ANA report. The yield on German 10-year bonds added six basis points, or 0.06 percentage point, to 0.92 percent.
Talks Ongoing
The proposal by the three international institutions overseeing Greece's finances -- the European Central Bank, the International Monetary Fund and the European Commission -- was only presented to finance ministers in Brussels on Friday.
For all the Greek skepticism, technical talks are ongoing in preparation for the finance ministers' meeting, the fifth session of the so-called Eurogroup on Greece in little more than a week.
The Athens Stock Exchange Index closed 2 percent higher Friday as details of the proposed package emerged. The index ended the week with a gain of 16 percent as investors remained hopeful that an accord would be reached.
Merkel alluded to an easing of the primary-surplus target terms, saying that Greece must reciprocate with a step toward creditors.
EU President Donald Tusk rejected the charge of blackmail, and neither is the common position of the institutions tantamount to an ultimatum, according to EU Commission President Jean-Claude Juncker.
"The decision-making machine is the Eurogroup and tomorrow is a crucial day not only for Greece but also for the euro area as a whole," Juncker said. "I'm quite optimistic, but not overly optimistic."
