By Lefteris Papadimas
ATHENS, June 20 (Reuters) - Greece's left-wing government promised on Saturday to offer concessions to creditors to unlock billions of euros in funds and stave off default but kept a defiant anti-austerity tone ahead of a vital summit of euro zone leaders next week.
With its banks hanging on life support from the European Central Bank, and billions of euros being withdrawn daily, Greece may have to impose capital controls within days unless a breakthrough is made at Monday's summit.
While Greece has resisted demands for pension cuts and some tax rises, its leaders continue to say a deal is possible to release 7.2 billion euros in bailout funds from the European Union and International Monetary Fund.
However, Europe's leaders have begun to lose patience after months of fruitless wrangling over what budget cuts and reforms Athens is prepared to deliver in exchange.
In a column for Germany's Frankfurter Allgemeine Sonntagszeitung, Finance Minister Yanis Varoufakis promised that Greece was prepared to move, although he gave no details.
"Our side will arrive in Brussels with the determination to compromise further as long as we are not asked to do what previous governments did: to accept new loan tranches under conditions that offer little hope that Greece can repay its debts."
He said German Chancellor Angela Merkel faced a "stark choice" over whether to accept an agreement, adding: "The choice, I am very much afraid, is hers."
Tsipras met his negotiating team in Athens and was expected to speak to European Commission chief Jean-Claude Juncker by phone to try to break the deadlock before the emergency summit, an EU official said.
An army contingent carry a Greek flag in front of the temple of the Parthenon before a hoisting ceremony at the Acropolis hill in Athens, June 18, 2015. (AP Photo/Yorgos Karahalis)
A full meeting of the cabinet was to be held at 11 a.m. (0800 GMT) on Sunday to discuss the proposals.
European ministers have played down the prospect of a final agreement on Monday but hope that a political understanding can be reached in time for a full deal to be agreed by the end of the month.
Greece needs money to avoid defaulting on a 1.6 billion euro IMF loan on June 30, a step that would endanger ECB support and Greece's continued membership of the euro.
Austrian central bank governor Ewald Nowotny, a member of the ECB governing council, told the daily Der Kurier that if Greece defaulted, it would be "technically bankrupt."
"In terms of economics and politics, it means chaos. There would be no alternative to exiting the euro and returning to the drachma."
The ECB on Friday raised the ceiling on the "emergency liquidity assistance" that Greece's banks rely on to keep their doors open.
Underlining international concern that a Greek default could ripple across the world economy, U.S. Treasury Secretary Jack Lew said it was up to Greece to make concessions.
"What we know is the best solution is for Greece to make some tough decisions and for this to be worked out," he told CNN television.
However it remains unclear how far Tsipras, whose leftist Syriza government came to power in January vowing to lift Greece out of austerity, is willing to bend.
Greek ministers maintained a defiant tone on Saturday, vowing to resist "blackmail" from creditors.
"They want the Syriza government to become a footnote after it is defeated, after it bows its head. The mandate we have is to not do them this favor," Interior Minister Nikos Voutsis told Sunday's newspaper Realnews.
People wave the Greek flag as they take part in a demonstration called by the Attac activist group in support of the Greek people on June 20, 2015 in Marseille, southern France. (BERTRAND LANGLOIS/AFP/Getty Images)
Under the austerity measures imposed by the IMF, the European Union and the ECB in two bailouts, economic output has fallen 25 percent, wages and pensions have been slashed, and one in four Greeks is jobless.
But after months of fractious negotiations, some European leaders are now openly contemplating the possibility of Greece becoming the first nation to be dumped out of the euro zone.
In an article in the Irish Times, Varoufakis criticized the behavior of his peers at a meeting of European finance ministers on Thursday.
"An impartial spectator of our eurogroup deliberations would come to the safe conclusion that it is a strange forum, one ill-equipped to forge good, hard decisions when Europe truly needs them," he wrote.
However, while some members of Syriza are not averse to quitting the euro, opinion polls suggest the majority of Greeks want to remain in the currency bloc they joined in 2001.
A poll published in Sunday's Avgi, a pro-Syriza newspaper, indicated that 62 percent believed they would be worse off if Greece returned to the drachma, while 22 percent felt they would be better off.
To that end, another rally is planned for the capital on Monday calling for Greece to stay in the euro.
Greek businesses have also called on Tsipras to solve the crisis. Andreas Andreadis, head of the Greek tourism association SETE, told the German magazine Boerse Online that a "Grexit" would push Greece "back to the level of a developing country." (Reporting by Angeliki Koutantou, Lefteris Papadimas, George Georgiopoulos, Renee Maltezou, Christoph Steitz, Shadia Nasralla and Paul Taylor; Writing by Matthias Williams; Editing by Kevin Liffey)