Greece scrambles to avoid default as deadline nears

Months-long talks to resolve Greece's financial crisis are inching closer to a climax, with both the beleaguered nation and its creditors finalizing proposals aimed at averting a default that could ripple across the globe.

Greece presented a proposal to its bailout lenders — the International Monetary Fund, the European Central Bank and the European Commission — to ease sweeping budget cuts and labor market changes required by its 240 billion euro bailout. Officials from those institutions and European leaders met Monday night to weigh the offer.

A senior official involved in the talks predicted the Greek government would make enough grudging concessions on new austerity measures to strike a deal with its lenders by Friday for new financing that would keep Greece solvent until the fall. The official declined to be named because of the sensitivity of the discussions.

The two sides have deadlocked since February on an agreement to unlock the final 7.2 billion euro chunk of its bailout package, which expires at the end of the month. Greece needs the money to fund the government and repay lenders. Greek officials have said they can make a 300 million euro payment to the IMF by Friday. But the country would be hard-pressed to fork over another 1.25 billion euros due mid-month.

The two sides remain far apart on painful pension and wage cuts for public workers and reforms to reduce worker protections. With Greece's economy reeling, Prime Minister Alexis Tsipras and his Syriza party were swept into office in January on an anti-austerity platform.

Economist Diego Iscaro of IHS Global Insight predicts a deal will ease belt-tightening targets but largely maintain other reforms. Here are four possible scenarios, according to Barclays Capital:

• Greek officials back off their hard-line stances and a deal is reached. This likely would trigger a political crisis in which left-wing Syriza politicians leave office. The risk of further bank deposit withdrawals and the need for capital controls would be minimized. Yields on Greek government bonds would fall on rising demand for Greek debt. This is the most likely scenario.

• Tsipras calls for a referendum on the deal because its terms defy Syriza's agenda. This likely would rock markets, spread to other struggling eurozone nations and set off more bank deposit withdrawals and the need for capital controls. In the end, the referendum likely would back the deal.

• Tsipras calls for "snap elections" to form a new government in a bid to populate it with more moderate lawmakers. This would draw out the impasse and create uncertainty for markets.

• Greece defaults on its debt by failing to reach a deal because of the outcome of the referendum or the elections. The ECB likely would stop funding Greek banks, forcing the country to form its own currency and exit the euro.

Although the economic consequences for Greece would be dire, new financial stability measures would largely shield the eurozone. The euro likely would fall further against the dollar, hurting the exports and earnings of U.S. multinationals, says Joe Quinlan, chief market strategist at U.S. Trust.