Deal between Greece and ECB likely in euro group meeting

The Eurogroup meeting was supposed to focus on the European Semester and the postprogramme surveillance of Spain, Portugal and Ireland. However as important as these issues are, they will remain on the sidelines, since Greece will dominate the debate.

A deal cannot be ruled out at the Eurogroup meeting on 18 June. For that to happen, it would require that Greece makes another proposal and an agreement at the staff level at the weekend, says Societe Generale. 

While some progress can be acknowledged (in particular, on the issue of the primary balance targets), Greece and its creditors remain far apart on the pension reform (and to a lesser extent the VAT reform) as the withdrawing of the IMF staff from the negotiations testifies. As a result, the risks that the bargaining process will continue until the very last minute.

A last minute deal would consist of the programme extension (by a few months), the €7.2bn frozen funds disbursed by mid-July (plus potentially 1.5bn of ECB profits for 2015), a possible increase in the T-bills ceiling and a debt restructuring offer with conditionality to be discussed after the summer. 

"Funds would only be released once Greece has passed an agreed list of reforms. A partial bailout only is not off the table, as the conditions for the IMF disbursement of the funds would not be met," according to SocGen.