Markets confident of timely Greek deal

Both creditors and the Greek government were under intense pressure from the IMF and dissident members of Syriza on the terms of the deal to unlock funds in Brussels.

The markets, however, appeared to be confident they would agree in time for the eurozone finance ministers meeting this evening as spreads between Irish and other bailout countries’ bonds and Germany’s narrowed.

Greek citizens seemed to be a little more reassured as the withdrawal of funds from banks appeared to ease slightly as the ECB increased emergency liquidity by just under €1 billion for the day.

IMF head Christine Lagarde was not at the press conference following yesterday’s eurozone ministers meeting, while there were reports that a less senior negotiator represented the body at negotiations yesterday.

They say the document setting out cuts of close to €8bn over the next 18 months was not close enough to that agreed in February, which was to be the basis of a settlement. The IMF is pushing for the EU bodies to cut Greece’s debt to ensure sustainability.

There were reported to be several contacts between the member states and the IMF and Ms Lagarde yesterday — any deal requires the agreement of all three institutions, the IMF, the ECB and the European Commission.

At the same time, some members of Alexis Tsipras government were threatening to vote against the proposals put forward on Monday, with the elimination of a lower Vat rate for the Greek islands a particular issue.

The fact the vast bulk of the measures come from increasing taxes — corporate and Vat — and cuts to and increasing costs on pensions, means continued austerity, contrary to Mr Tsipras’ promises on coming to power.

While tomorrow’s finance ministers are expected to sign off on the cuts they will also need to be reassured that the measures to achieve them are fully locked in, which was a key element of the negotiations yesterday.

The eurozone leaders will consider the package at their summit on Thursday when it is expected they will agree some reference to debt reduction, most likely in a third bailout programme for next year.

Greece is also anxious to follow Ireland’s example and pay down its high interest rate IMF loans, which fall due regularly, compared to the low interest EU loans that have been pushed out to the future.

The leaders will also want to be reassured that Mr Tsipras will have sufficient votes to approve the deal in his parliament while it will be expected to be passed in the other EU parliaments that require it including Germany.

Irrespective of how quickly this can be done now, it will not leave enough time to release funds to pay off the IMF the €1.6bn due on Tuesday, and instead the money is expected to come from either the Bank Stability Fund or the Greek bond profits with the ECB