The latest proposal from European Council President Charles Michel is spurring hope of a deal on a huge post-COVID recovery stimulus package after an EU summit went into its fourth day amid a continuing rift between 'frugal' northern European countries and the potential biggest beneficiaries in southern Europe.
"There was a breakthrough last night and I'm cautiously optimistic," Premier Giuseppe Conte said ahead of the fresh negotiations.
He said Italy was in favour of funds being used for green purposes, vowed to "fight to the end for large resources" and stressed "we cannot joke around or hesitate.
"Let's stop navel gazing, we need an effective plan or it won't be needed at all".
Foreign Minister Luigi Di Maio said "Conte is aiming firmly for the best result".
German Chancellor Angela Merkel, who as EU duty chair is mediating between the sides, said "there i a the framework for a possible accord".
The original plan for was a 750 billion package divided into 500 euros of grants and 250 of loans But the 'frugals' - Netherlands, Sweden, Denmark and Austria, joined by Finland - insisted on the amount of grants being cut and on attaching conditions such as labour and pension reforms to the hand-outs.
Dutch Premier Mark Rutte has been leading the frugals and has had "extremely tense" exchanges with Conte, among others, according to the Italian PM.
The latest proposal from Michel is to cut the grants from 500 to 390 billion euros, an idea that has prompted a cautious opening from the Netherlands and Austria.
There is now a deal on the table for a 700 billion total fund comprising 390 billion in grants and 310 billion in loans, Portuguese Premier Antonio Costa said before talks resumed.
EU diplomatic sources said the frugals might be ready to accept Michel's plan if other issues, including EU budget rebates, were resolved to their satisfaction. Rutte has also described as "excellent" Michel's proposal of a three-day "super emergency brake" which would effectively give any EU member a veto on national spending plans.
But Conte said Monday afternoon that "any single country cannot have control, I'm not giving up on that".
Austrian President Sebastian Kurz said the proposed reduction of the grants was an "excellent result".
Another issue holding back agreement is the insistence of many countries led by the frugals to tie funding to Hungary and Poland to their respect for the rule of law, on which they have made controversial changes running counter to EU legal standards in recent years.
Hungarian Premier Viktor Orban has accused Rutte of pursuing a vendetta against him on this issue.
The summit, the longest since a five-day meet in Nice 20 years ago on admitting new members to the EU, was initially adjourned until 16:00 Monday (14:00 GMT). It was then put off further, until 17:00 local (15:00 GMT). And then it was put off for the third time, until 18:00 local (16:00 GMT).
Conte was still hoping to preserve as much of the original format of 500 billion euros of grants and 250 of loans that he can.
He has been backed by Germany and France, the two biggest EU members, as well as Spain, which would be the second biggest recipient of the fund after Italy.
French President Emmanule Macron reportedly banged his fist on the table in a tense exchange with Rutte.
But Merke is also more inclined for some degree of compromise, in her role as mediator.
Italy stands to get almost 182 billion euros, the highest single amount, from the originally proposed plan, as it is the worst-hit EU member with 35,000 deaths.
The summit must also rule, unanimously, on the EU's seven year 1-trillion euro budget, which is part of the post-virus recovery efforts and earmarks vast sums for boosting the green and digital economies.
The EU leaders have now been haggling for some 48 hours since the summit began Friday - even more for Conte and Macron, who arrived a day early, Thursday, for a pre-summit tete-a-tete.
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