Greece asks for bailout extension as clock ticks down

Greece pleaded for a short-term bailout extension on Tuesday to avert a midnight default as frantic efforts gathered pace to salvage a deal that could keep Athens in the euro, withGermany warning that time had run out to extend vital credit lines.

As the clock ticked down towards midnight, when billions of euros in locked-up bailout funds are due to expire, euro zone finance ministers called a last-minute conference call (1700 GMT) to discuss the Greek request.

European Commission President Jean-Claude Juncker appealed to Athens to accept the deal proposed by international creditors last week while holding out hopes that some extra tweaks could still be possible.

Leftist Greek Prime Minister Alexis Tsipras, who has called a referendum for Sunday to vote on the bailout terms, responded with a counter-proposal, requesting a two-year deal covering funding support and debt restructuring, an issue the lenders have so far been reluctant to tackle.

If no agreement is reached, Greece will default on a loan to the IMF, setting it potentially on a path out of the euro with unforeseeable consequences for both the European Union's grand currency project and the global economy.

However the proposals appeared so far apart that success seemed highly unlikely.

German Chancellor Angela Merkel, whose country is Greece's biggest creditor, gave a cool response to talk of an 11th hour compromise, suggesting that there may be no time left for a deal.

"This evening at exactly midnight Central European Time the programme expires. And I am not aware of any real indications of anything else," she told a news conference.

EU and Greek government sources said Juncker, who spoke to Tsipras late on Monday, had offered to convene an emergency meeting of euro zone finance ministers to approve an aid payment to prevent Athens defaulting if the Greek leader sent a written acceptance of the terms.

However as last-ditch efforts continued, the growing risk of Athens being forced out of the single currency brought into sharp focus the chaos likely to be unleashed in Greece and the risks to the stability of the euro.

"What would happen if Greece came out of the euro? There would be a negative message that euro membership is reversible," said Spanish Prime Minister Mariano Rajoy, who a week ago declared that he did not fear contagion from Greece.

"People may think that if one country can leave the euro, others could do so in the future. I think that is the most serious problem that could arise."

The last-ditch bid from Brussels came as uncertainty built ahead of Sunday's referendum, in which Tsipras has called for a "no" vote.

Former Greek Prime Minister Antonis Samaras, leader of the main opposition party, said a "No" vote would push the country out of the single currency and wipe out wages and pensions.

The euro fell against the dollar EUR= but European shares, which dropped sharply on Monday, steadied on hopes of a deal. .EU The Athens stock exchange is closed during a week-long shutdown of the banking sector which began on Monday.

Opinion polls show a majority of Greeks favour holding on to the euro but a rally of tens of thousands of anti-austerity protestors in Athens on Monday highlighted the defiance many about being pushed into a corner by the lenders.