REPORT: A Greek deal is finally being drafted

RTX1ER8HREUTERS/Alkis KonstantinidisGreek Finance Minister Yanis Varoufakis (L) welcomes Prime Minister Alexis Tsipras for a meeting at the ministry in Athens, Greece May 27, 2015.

It looks like an agreement on Greece may finally be looming into view.

Bloomberg are reporting that a staff-level accord is being drawn up.

A staff-level accord would mean an agreement between the two technical negotiating teams — one representing the institutions (formerly known as the Troika) lending to Greece, and one representing Athens.

That doesn’t mean that the deal is done or is definitely going to be done. A staff-level accord would have to be approved by both the Eurogroup of European finance ministers and the Greek government.

However, it would be a very positive sign since the teams know the positions of their own decision-makers.

Athens stocks are loving the news:

Things to look out for from here on out are any details on four things

  • Fiscal restraint: What Greece’s budgetary austerity will look like is a major factor in a deal.
  • Privatisation: The government came to power on an anti-privatisation platform so concessions here could have a big political impact.
  • Labour market reforms: The International Monetary Fund (IMF) reckons this is where Greece’s reforms have been most successful so far, and so was pushing hard for further changes to the country’s rigid work laws.
  • Pensions: Greece’s relatively generous pension system has been in the creditor groups’ cross-hairs from the beginning.

Those are the areas on which a deal will be made or broken in the days ahead.

There’s been a flurry of news today indicating that Greece will be in dire straits without a deal soon.

Greek banking deposit outflows climbed to €5 billion ($US5.44 billion GBP, £3.54 billion) in April, according to Reuters. That’s more than double what was withdrawn in March.

There’s further sign that the speed may be accelerating — according to Greek newspaper Kathimerini €300 million ($US326.10 billion, £212.46 billion)) left Greek banks on Tuesday alone.

That’s not entirely surprising given yesterday’s suggestion from finance minister Yanis Varoufakis that Greece could bring in a tax on bank transactions and withdrawals. Though the suggestion was later withdrawn by the finance ministry, the back-and-forth only heightened the sense that the negotiations are extremely disorganised.

Here’s how it looks:

There’s a good summary of the situation here from a JP Morgan note out Wednesday:

What’s changed in the last 8 weeks? Not much: bank liquidity, state finances, consumer confidence and business confidence are all declining and NPLs are rising while negotiations go on. As time goes by, we see any agreed deal closer to the Troika’s initial position on structural reform with some allowance for the Greek desire for a smaller primary surplus including a recognition that GDP growth this year will be well below the original plan of 2.9%.

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