Greece delayed a key debt payment to the International Monetary Fund due on Friday as Prime Minister Alexis Tsipras, facing fury among his leftist supporters, demanded changes to tough terms from international creditors for aid to stave off default.
The IMF said Athens planned to bundle four payments due in June into a single 1.6 billion euro lump sum which is now due on June 30.
It was the first time in five years of crisis that Greece has postponed a repayment on its 240 billion euro bailouts from euro zone governments and the IMF, even though Tsipras said earlier this week that Athens had the money and would make the payment.
The delay came as German Chancellor Angela Merkel said talks on a cash-for-reforms deal were still far from reaching an agreement.
In a sign of accelerating efforts to bridge the remaining differences, Tsipras, Merkel and French President Francois Hollande spoke late on Thursday evening via conference call, according to a Greek government official.
Tsipras told the two leaders that the lenders' proposal could not be a basis for a deal because it was not taking into account the progress made in talks in Brussels over the past months, the official said adding that there was optimism that a deal could be reached soon.
Tsipras, elected in January on a promise to end austerity, returned from late night talks with EU officials in Brussels to face an outcry over conditions that would breach the "red lines" his Syriza party has declared.
He told ministers the government could not accept "extreme proposals" and said the creditors should understand that the Greek people had suffered enough and they "have to stop playing games at its expense", a Greek official said.
"They have not made any step back, regardless of the convergence reached during these four months on reforms that the Greek side included in its proposals but the lenders draft proposal did not," the official said on condition of anonymity.
Tsipras is due to brief parliament on the negotiations from 11 a.m. EDT on Friday.
Earlier the novice prime minister left the talks with European Commission President Jean-Claude Juncker and the chairman of euro zone finance ministers, Jeroen Dijsselbloem saying a deal with lenders was "within sight" and that Athens would make a 300 million euro payment to the IMF on Friday. His tone appeared to harden after he ran into a backlash in Athens.
European officials continued to voice optimism that an agreement could be clinched in the coming days, but they acknowledged that large gaps remained to be bridged and said they expected Greek counter-proposals.
Tsipras rejected pension cuts and a tax rise on electricity that he said the lenders were demanding along with other conditions to win the release frozen loans and avert a default that could hit euro zone and world markets.
Sources familiar with the creditors' five-page plan said it also asked Athens to commit to selling off state assets and maintaining unpopular labor reforms, demands that would cross the party's declared red lines.
The lenders were demanding that Greece reduce spending on pensions by 1.0 percentage point of gross domestic product and raise a further 1.0 percent or 1.8 billion euros ($2 billion) by increasing value-added tax on products ranging from drugs to electricity, the sources told Reuters.
Merkel, the EU's most influential leader, said the end was not yet in sight in the talks, telling a news conference: "The talks are far from reaching a conclusion."
She has tried to force the pace this week, at least partly to avoid a Group of Seven summit she will host in Bavaria from Sunday turning into another crisis session on the euro zone, highlighting Europe's difficulty in solving its own problems.
Her spokesman said Tsipras would not be invited to the G7.
Dijsselbloem said the Brussels talks that ran beyond midnight had narrowed down the remaining issues but differences were "still quite large" and Athens was expected to present alternatives to some of the lenders' proposals within days.
An EU source said Tsipras could return to Brussels for further talks late on Friday night or Saturday, possibly along with top IMF and ECB officials
Time is running out to clinch a deal and get disbursements approved by national parliaments before the bailout program expires at the end of June.
In one concession, the lenders were offering to unlock 10.9 billion euros in unused bank bailout funds that would enable Greece to cover its financial needs through July and August, an amount that is more than the 7.2 billion euros left in the expiring bailout.
Anger in Athens
As details of the confidential lenders' proposal trickled out, members of Tsipras' government and his Syriza party denounced the conditions as unacceptable.
The backlash highlighted the risk of a revolt in Syriza if the prime minister decides he has to accept a deal, not least because a big majority of Greeks want to stay in the euro zone.
"(Juncker) took on the dirty work and conveyed the most vulgar, most murderous, toughest plan when everyone hoped that the deal was closing," Alexis Mitropoulos, a deputy parliament speaker and senior official within Syriza told Mega TV. "And that at a time when we were finally moving towards an agreement we all want because we rule out a rift leading to tragedy."
Avgi, the Syriza party newspaper headlined Thursday's edition: "A continuation of austerity? No, thanks!".
Some lawmakers in the ruling party have said Tsipras could call early elections or a referendum if he had to accept a deal that crossed Syriza's "red lines".
Conservative opposition leader Antonis Samaras, who led the government that implemented much of Greece's tough bailout before being defeated in January, urged Tsipras not to call elections but to seek a national consensus on the negotiations.
With Europe's big powers, and the United States, concerned about the unpredictable outcome as Greek reserves shrink toward zero, the creditors also showed some willingness to compromise by lowering the budget surplus that Athens will be required to run before debt service payments.
Sources familiar with the proposal said they now sought a primary surplus of 1.0 percent of gross domestic product this year and 2.0 percent next year. Greece has offered 0.8 percent this year and 1.5 percent in 2016. However, since the Greek economy has fallen back into recession, lowering tax revenues, the lower target will still require painful retrenchment.
Tsipras ruled out scrapping an income supplement for the poorest pensioners or a value-added tax change that he said would raise the tax on electricity by 10 percentage points.