EU's Tusk urges debt relief for Greece

EU President Donald Tusk said Thursday that Greece's creditors must make a "realistic" proposal for managing the country's huge debt, as Athens faces a midnight deadline to submit reform plans for an international bailout.

Greece's calls for its debt to be tackled have been backed by the International Monetary Fund and US Treasury Secretary, but Germany leads a hardline group of eurozone nations that are strongly opposed.

"I just spoke with the Greek Prime Minister Alexis Tsipras. I hope that today we will receive concrete and realistic proposals of reforms from Athens," Tusk told a joint press conference with Luxembourg premier Xavier Bettel.

"If this happens we will also need a parallel proposal from the creditors. The realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors," Tusk added.

"Only then will we have a win-win situation."

If Greece submits its proposals on time on Thursday, they will then be examined by the "troika" of creditor institutions -- the European Commission, the European Central Bank and IMF -- before going on to political leaders.

Tusk, the former Polish premier, has set a special summit of all 28 European Union members on Sunday as the final deadline for a deal to bail out Greece and keep it in the European single currency.

Leftist premier Tsipras has called for a reduction of Greece's massive 320-billion-euro ($350-billion) debt mountain to be part of any deal for its third international bailout since 2010.

But Germany and many other eurozone nations reject any move to write off Greek debts, especially after Greeks in a referendum last weekend backed Tsipras's decision to reject the creditors' demands for further austerity.

A spokesman for the European Commission said Wednesday that its president, Jean-Claude Juncker, had called earlier this week for debt sustainability to be part of a Greek deal "under the understanding that that would come later in October, provided that the other conditions would have been met."

IMF chief Christine Lagarde said on Wednesday that a new programme to prop up Greece's finances would require creditors to restructure debt in addition to the reforms Athens must make.

"The other leg is debt restructuring, which we believe is needed in the case of Greece for it to have debt sustainability," she told a conference in Washington.

US Treasury Secretary Jacob Lew made similar comments on Wednesday, saying the IMF was right to focus on the issue and that Greece's debt "is not sustainable."

But German Chancellor Angela Merkel said after an emergency summit of the 19 nations that use the single currency on Tuesday that debt relief would be illegal under the EU's treaties.

"A haircut is out of question," she said when asked about the possibility of restructuring Greek debt.