BRUSSELS (Reuters) - EU paymaster Germany said on Monday it could make sense for Greece to hold a referendum on painful economic reforms under negotiation with its creditors, changing tack as Berlin's own lawmakers bridle at further aid for Athens.
Euro zone governments have previously opposed such a vote, saying there is no time and it could destabilise financial markets and trigger a run on struggling Greek banks.
When former Prime Minister George Papandreou surprised EU partners by proposing a referendum in 2011 at the height of the euro zone debt crisis, he was summoned to emergency talks with leaders of France and Germany and told bluntly to drop the idea.
But with Greece running out of money and desperate for a deal to avert a possible default and exit from the euro zone, German Finance Minister Wolfgang Schaeuble said securing public backing for the necessary sacrifices might be useful.
A referendum could make it easier for leftist Greek Prime Minister Alexis Tsipras to climb down on election promises that are making a deal on economic reforms hard to achieve.
"If the Greek government thinks it must hold a referendum, then let it hold a referendum," Schaeuble said on arrival at a meeting of euro zone finance ministers.
"That might even be a helpful measure for the Greek people to decide whether it is ready to accept what is necessary, or whether it wants something different."
Hinting at growing difficulties in persuading conservative German lawmakers to go on funding Greece, Schaeuble said it was unrealistic to think any parliament in Europe would agree without the backing of the International Monetary Fund.
Greece's leftist-led government has accused the IMF of setting harder targets than the European creditors on pension and labour reforms and a primary fiscal surplus. The three institutions have denied any internal differences.
Finance Minister Yanis Varoufakis, who was due to hold private talks with Schaeuble before the Eurogroup session, told reporters that Athens would make a crucial 750 million euro (S$1.11 billion) payment to the IMF on Tuesday as due.
"Greece will always meet its obligations to its creditors and we are obviously going to do that tomorrow again,"Varoufakis told Euronews.
Schaeuble said there had been little or no progress in talks between Greece and the IMF, European Commission and European Central Bank.
Greece is demanding that the ministers acknowledge "significant progress" in the negotiations, hoping to unlock short-term borrowing to ease its acute financing crunch.
Italian Economy Minister Pier Carlo Padoan said he did not believe ministers would make such a joint statement, although Eurogroup chairman Jeroen Dijsselbloem would hold his usual news conference after the meeting.
Sources familiar with European Central Bank thinking said there was still too little progress on key issues and too much uncertainty for the bank to allow the Greek government to sell more short-term Treasury bills.
Schaeuble said any release of additional funds depended on representatives of the three creditors certifying actual implementation of the reforms, not just promises.
A senior EU official said there has been no breakthrough on the central sticking points of pension and labour market reforms and budget targets for this year and next.
Slovakian Finance Minister Peter Kazimir summed up many ministers' frustration when he said there had been improvements in the process but no progress in substance, with wide gaps between what Greece says in Brussels and what it does in Athens.
Euro zone officials believe Greece has scraped together enough money, notably by commandeering cash reserves of local authorities and pension funds, to meet its payment obligations until the end of May.
They say the real deadline for a deal is end-May to enable parliamentary approval in some euro zone countries, notably Germany, in time to release the remaining 7.2 billion euros in bailout funds before the programme expires at the end of June.
Elected in January on promises to end austerity and scrap an international bailout, the leftist-led government is refusing to agree to pension cuts, raise the retirement age, or ease layoffs in the private sector.
It is also at odds with creditors on the size of the primary budget surplus and on longer-term financing.
Varoufakis was sidelined from the conduct of the talks after he alienated fellow ministers with outspoken interviews and economics lectures, climaxing with a clash last month at a Eurogroup meeting in Riga.
Tsipras shook up the negotiating team and made some concessions on restarting privatisations and harmonising value added tax. But he has so far balked at crossing the "red lines"of what he calls his popular mandate.
Two-year Greek bond yields edged up above 20.8 percent on Monday as nervous investors weighed the risk of a default. Italian, Spanish and Portuguese bond yields also ticked up.
A senior IMF official noted that polls showed three-quarters of Greeks want to remain in the single currency and said the global lender wanted to help Athens make the necessary reforms.
"The IMF is very keen on continuing to support the adjustment and the reforms that are needed to ensure that Greece operates successfully in the euro area," Jord Decressin, deputy director of the IMF's European Department, said in Budapest.