The markets have not surprisingly responded positively to the headlines that Greece and its creditors have started to draw up some form of an agreement. There are no details at the moment, but Greek officials have indicated that the proposal will include a lower initial target for Greece's primary budget surplus than specified in the existing bail-out agreement, as well as no cuts in wages and pensions. On the face of it, that looks like a good deal for Greece.



But the experience of the last few months suggests that it would be wise to treat the reports with a healthy dose of caution. Not only has an EU official refused to confirm that a proposal is actually being drawn up, but the fact that it is being described as "staff level" suggests that it has not been approved - or perhaps even discussed - by the leaders of the so-called institutions - the EC, the ECB and the IMF.



"As we have long argued, nothing short of a major write-down will make a material difference to Greece's debt outlook and we very much doubt that the EC and ECB have signed up to such an outcome. As such, we maintain our position that any deal which emerges over the coming days is likely to be nothing more than a stop-gap and will not address the fundamental issue of Greece's contracting economy and expanding debt mountain." says Capital Economics