Greece bonds rallied on Tuesday amid expectations that a breakthrough in the the country's bailout talks could be imminent after the Greek government submitted a new reform proposal to creditors.

But with the troika of international lenders expected to present their own proposals to the Greek government today, there was mounting uncertainty about whether a deal acceptable to both sides would be agreed.

Greek prime minister Alexis Tsipras said he had submitted his proposal to the troika of lenders – the European Commission, European Central Bank and IMF – on Monday night following a meeting in Berlin between German chancellor Angela Merkel, her French counterpart François Hollande and the heads of the European Commission, the IMF and the European Central Bank.

The move was seen by many as an attempt by the Greek leader to seize the political initiative and demonstrate Greece’s willingness to come forward with a proposal, should talks with negotiators break down.

Political responsibility

Suggesting that the political responsibility for a deal lay with Greece’s international lenders and not with the Greek government, Mr Tsipras said he believed the “political leadership of Europe” would view the Greek proposals “with respect”.

“It is now clear that the decision for whether they want to adapt to realism and emerge from the crisis without the division of Europe, the decision belongs to the political leadership of Europe.”

In a boost to the Greek side, the European Central Bank is understood to have raised the ceiling of emergency liquidity assistance (ELA) it offers to the Greek banks to €80.7 billion on Tuesday, an increase of about €500 million. The bank’s regular reassessment of its ELA provision to Greece was made ahead of the ECB’s governing council convenes in Frankfurt for its regular rate-setting meeting.

With a meeting in Berlin on Monday suggesting an elevation of the negotiations to the highest political levels both within the European Union and the IMF, there was growing expectation that a deal of sorts would be agreed by the end of the week.

At a briefing with the foreign press on Tuesday in Berlin, Chancellor Merkel declined to comment on the record about Monday’s late-night meeting in Berlin.

Senior German officials described it as part of “regular consultations”. However, one well-briefed source confirmed that an “absolutely final offer” had been made to Greece to release €7 billion in frozen funding.

‘Great intensity’

A German government spokesman said all participants in the meeting, which ended at 11.30pm on Monday, would continue “with great intensity”.

“The participants in the talks were in the closest contact in the last days and will remain so in the coming days – among each other and of course with the Greek government,” said a German government spokesman.

Senior German officials said no significance should be attributed to the absence of the Greek premier from the meeting, saying the meeting was just the latest in a series of consultations between Berlin and the three institutions responsible for the Greek programme. Berlin sources said they had no knowledge of reports that their offer to Athens contained debt relief proposals.

The Greek government is facing a €300 million repayment to the IMF on Friday, the first of four instalments this month totalling €1.6 billion, increasing the pressure on Greece to strike a deal this week.

But it remains unclear whether the Greek government’s proposal has made sufficient concessions on issues such as pension and labour market reforms, and the VAT system – key stumbling-blocks in the negotiations over the last four months.

Amid continuing reports of divisions between the IMF and the European Commission in their approach to the Greek bailout discussions, the US reiterated its concern over the continuing Greek standoff.

In a speech in Washington on Tuesday, Federal Reserve board member Lael Brainard specifically referenced the Greek situation, warning that the situation could deteriorate further. He said the Fed was "very attentive" to potential volatility should the Greek talks end without agreement.