European shares extended the previous session’s sharp rally and climbed to a three-week high on Tuesday, with growing expectations that Greece was getting closer to strike a deal with its international creditors boosting the sentiment further.

Greece has presented new budget proposals that euro zone leaders welcomed as a basis for a possible agreement to unlock frozen aid and avert a looming default.

European Council President Donald Tusk has called the Greek proposals “a positive step forward’’. He said the aim was to have the Eurogroup finance ministers approve a cash-for-reform package on Wednesday evening and put it to euro zone leaders for final endorsement on Thursday morning.

“Still no Greek deal though, but plenty of optimism that we are edging closer. This comes from experience, with years of similar happenings resulting in deals at the last minute,’’ Mike van Dulken, head of research at Accendo Markets, said.

The pan-European FTSEurofirst 300 index was up 0.9 per cent at 1,579.34 points by 0710 GMT after rising to a high of 1,580.14, the highest level since early June. The index had closed 2.4 per cent higher in the previous session.

The euro zone’s Euro STOXX 50 rose 0.8 per cent to a three-week high after gaining 4.1 per cent on Monday, its biggest one-day percentage rise since August 2012.

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