Greek Deal hangs in balance

The Greek government has finally submitted detailed proposals to its creditors as the basis for a 3-year programme of support. These are being examined by the creditors and euro area finance ministers ahead of a Eurogroup meeting tomorrow.

The Greek parliament is also set to vote on the package today or tomorrow. Although approval is expected, any government MPs that vote against the proposals may be viewed as a possible signal of implementation risk, noted Lloyds Bank.

Tomorrow's Eurogroup meeting will be critical to any agreement. If the Greek plan is approved on Saturday (with the possibility of a bridge loan until the ESM process is complete), then a scheduled EU leaders' Summit on Sunday could be cancelled and from Monday the ECB should gradually attend to the liquidity crisis in the Greek banking sector. If there are still outstanding issues to be resolved then the Eurogroup can meet again on Sunday. However, a complete breakdown of negotiations would probably see the EU Summit discuss a Grexit and its ramifications.

In the first instance, Monday could see the ECB withdraw ELA support. Against what could be a fairly febrile backdrop, several data releases, including Tuesday's German ZEW and euro area industrial production will probably attract minimal attention.

Thursday's ECB policy announcement should, assuming a full agreement, leave policy unchanged. However, in the event of a Grexit, it is possible that QE could be extended. In any case,  President Draghi can expect some pointed questioning on the Greek situation, says Lloyds Bank.