By George Georgiopoulos
ATHENS (Reuters) - Greek lawmakers reacted angrily on Tuesday to concessions Athens offered in debt talks and parliament's deputy speaker warned the proposals would struggle to win approval, puncturing optimism that a deal to lift Greece out of crisis might be quickly sealed.
European leaders on Monday welcomed the new budget proposals from Athens as a basis for a possible agreement to unlock frozen aid and avert a default that could trigger a Greek exit from the euro zone.
Stock markets also welcomed the plan, with European shares extending the previous session's sharp rally and climbing to a three-week high on Tuesday, with growing expectations that Greece was getting closer to striking a deal.
But Prime Minister Alexis Tsipras, who was voted into office in January on a pledge to roll back years of austerity in a country battered by recession, must keep his leftist Syriza party as well as his creditors onside for a deal to stick.
"I believe that this program as we see it ... is difficult to pass by us," Deputy parliament speaker and Syriza lawmaker Alexis Mitropoulos told Greek Mega TV on a morning news show.
If parliament does fail to back the latest offer, which included higher taxes and welfare changes and steps to curtail early retirement, Tsipras might be forced to call a snap election or a referendum that would prolong the uncertainty.
Athens urgently needs money to avoid defaulting next week on a 1.6 billion euro loan to the International Monetary Fund, while jitters over the health of Greece's banks have prompted savers to pull billions of euros out of their accounts.
The European Central Bank raised the ceiling on emergency liquidity Greek banks can draw from the country's central bank for a second time in two days on Tuesday, a banking source told Reuters, declining to say by how much.
"The prime minister first has to inform our people on why we failed in the negotiation and ended up with this result," Mitropoulos said. "I believe (the measures) are not in line with the principles of the left. This social carnage ... they cannot accept it."
But with Greece perilously close to bankruptcy, it remains unclear whether lawmakers would pull the rug from under Tsipras if he secures a deal.
There have been several false dawns in the negotiations. Tsipras appeared to have reached an understanding with the creditors at the start of June, only to blast their demands as "absurd" in parliament.
"If (the government) does not have the parliamentary majority, it cannot remain (in power)," government spokesman Gabriel Sakellaridis told Mega TV.
Ahead of emergency talks on Monday in Brussels, Tsipras had spent hours with his cabinet in an apparent attempt to secure their backing.
"The government has fallen into a trap, I don't know to what extent this can be implemented," Pavlos Haikalis, a deputy with Syriza's junior coalition partner, the Independent Greeks, told Antena TV.
European Council President Donald Tusk, who chaired an emergency summit of leaders of the 19-nation currency bloc, called the Greek proposals "a positive step forward". He said the aim was to have the Eurogroup finance ministers approve a reform package on Wednesday evening and put it to euro zone leaders for final endorsement on Thursday morning.
But German Chancellor Angela Merkel, whose country is Greece's biggest creditor, was more cautious, saying there were no guarantees that a final agreement could be reached.
Greek newspapers on Tuesday saw a deal in sight but warned that, with the exact terms not finalized, the creditors could ask for tougher measures.
"The deal is not only visible but there are sound expectations that it will be concluded in the next days," Greek daily Ethnos said. "While this dissipates reasonable fears of catastrophic consequences in the event of a failure in the negotiations, the difficulties are ahead of us."
One difficulty "is approving the agreement in parliament without reactions from lawmakers in the two ruling parties that could ... upset the government's stability."
(Writing by Matthias Williams; editing by John Stonestreet)