Greece Prepares New Bailout Bid ahead of EU Summit

European leaders faced a dilemma Monday about whether to back down in the face of a resounding Greek rejection of their austerity demands, amid signs that Greece was preparing a more conciliatory bid for financial rescue just days before its banks face collapse.

All eyes were on a European Union conclave on Tuesday that promises to be decisive for Greece, whose banks risk running run out of cash within days. The pressure intensified after the European Central Bank decided Monday not to expand its life support for the Greek lenders, raising the prospect that they could be out of money by Wednesday absent an ECB reversal. That could force Greece off the euro, the common currency of 19 of the E.U.’s 28 member states.

Europe’s decisions about how to respond to Sunday’s Greek referendum, which rejected Europe’s exacting bailout terms, will determine far more than the fate of the flailing Mediterranean nation. Other euro-zone countries with shaky finances, such as Spain and Portugal, are watching to see whether Europe backs down from its tough economic demands in the face of domestic rebellions. That would spark new pressures in those nations. And if Greece is kicked off the euro, the ensuing turmoil might inspire efforts in other nations to quit the currency club.

E.U. leaders said Monday that they were awaiting Greece’s new bailout proposals, hinting at the possibility of a compromise despite vows last week that there would be no further discussion if Greeks rejected Europe’s terms,