Greece on Monday kept alive hopes of an eleventh-hour deal with creditors to avoid default after Athens presented its first substantial concessions in months of fruitless negotiations.

But the leaders welcomed them as the basis for more talks this week on a deal to unlock €7.2bn in bailout cash.

Donald Tusk, president of the European Council, said Athens had produced “its first real proposals in many weeks”.

Jeroen Dijsselbloem, who heads the eurogroup of eurozone finance ministers, called the new Greek proposal “a positive step”.

Investors reacted on Tuesday by selling the euro, a sign analysts interpreted as market relief. The single currency was down 0.8 per cent at $1.1254 in early trade.

Equity markets continued their positive mood from Monday, with the pan-European FTSE Eurofirst 300 up 0.8 per cent to 1,578 in early trade after rising 2.4 per cent the day before.

On Monday the main Athens stock index closed up 9 per cent and bank shares surged more than 20 per cent amid hopes of a breakthrough.

The Greek submission only arrived on Monday morning, after Athens accidentally sent the wrong draft on Sunday night.

Mr Dijsselbloem said it came too late for a comprehensive assessment by Greece’s three bailout monitors that would have allowed for a deal to be reached.

Jean-Claude Juncker, the European Commission president, said finance ministers would be called back on Wednesday in an effort to finalise an agreement ahead of a long-scheduled EU summit on Thursday, and two Greek ministers would remain in Brussels to negotiate with creditors.

Some eurozone members remain deeply sceptical of the chances for a deal. According to three officials, finance ministers had an intense discussion about whether capital controls should be imposed in Greece.

Germany’s Wolfgang Schäuble and Michael Noonan, his Irish counterpart, pushed for curbs on emergency liquidity for Greek banks unless capital controls were imposed, one of the officials said.

But Mr Juncker said capital controls had not come up during the summit of eurozone presidents and prime ministers on Monday night.

People who have seen the latest Greek plan said Athens was proposing new savings in the pension system — the biggest sticking point between the two sides — that will amount to nearly 0.4 per cent of gross domestic product this year and just over 1 per cent next year.

But that is short of the 1 per cent savings this year and next that Greece’s creditors had demanded.

It also relies on higher employer contributions which, alongside proposed tax changes targeting corporate profits, could crimp economic growth, some creditor officials fear.

The two sides also remain at loggerheads over rates of valued added tax on electricity and processed food.

“I feel that — to use the phrase used by many EU officials — the ball is in the court of the Europeans,” Mr Tsipras said after the day-long negotiations had wrapped.

According to officials who attended the eurogroup meeting, Christine Lagarde, the International Monetary Fund chief, was particularly tough, suggesting that the new Greek plan still did not go far enough.

At the evening summit of eurozone leaders, officials said Mr Tsipras acknowledged he had lost the trust of many leaders in the room and tried to rebuild confidence by outlining the breadth of concessions he had made.

Mr Tsipras also raised the issue of debt relief during the session, something he has insisted on as a necessity to get support for a reform programme at home. Officials said he was told by other leaders that the issue could not be part of the current deal, but there was willingness to discuss it as part of future negotiations.

Angela Merkel, German chancellor, said at a post-summit press conference that she was open to considering debt relief — but only after the current negotiations over economic reforms were completed first.

Officials had warned that without an agreement soon it was increasingly likely that Athens would run out of time to secure bailout funds before its EU rescue programme expires next week. That could lead it to default on a €1.5bn loan repayment due to the IMF at the end of the month.

Greece’s banking system remains under severe strain, with depositors continuing to withdraw cash in large amounts on Monday. Eurozone finance ministers held an intense debate at their closed-door meeting on whether Athens should impose capital controls to stem deposit withdrawals, three officials said.

The European Central Bank on Monday raised the limit on the amount of emergency liquidity assistance (ELA) available to Greek lenders by about €2bn, said two central banking officials. But it is due to discuss the issue again on Tuesday — a sign that it is now keeping Greek banks on a short leash. The daily, rather than normal weekly, approvals indicate how concerned the ECB governing council is about the risk of a bank run.

Mr Schäuble and Mr Noonan argued forcefully for limits on the amount of ELA approved by the central bank unless capital controls were introduced.

But there was no decision on whether such controls were needed and ECB officials hit back, saying ministers should not be weighing in on monetary policy.

Yanis Varoufakis, Greek finance minister, said such curbs would be very difficult to enforce, noting that Greece is bigger than Cyprus, the only other eurozone country to have required capital controls.

“We’re not an island with no borders and one airport,” one official quoted Mr Varoufakis as saying.