Greece submits reform proposals, but analysts remain cautious

Greece has submitted a new and eagerly-awaited proposal for economic reforms in a last-minute bid to clinch a bailout deal with its international creditors, but analysts remained cautious.

On Thursday night,Prime Minister Alexis Tsipras submitted a 13-page document which appears to mark a significant move towards creditors’ own proposals on the part of Athens.

Significantly, an overhaul of the pensions system was slated to start this month.

All eyes will now be on whether the Greek parliament approves the bailout proposal and what political tensions it might generate within Tsipras's own Syriza party. Nevertheless, the biggest hurdle will be to obtain the stamp of approval from German lawmakers.

On a positive note, German finance minister Wolfgang Schaeuble was cited as having said that Greece’s debt was not sustainable without debt relief, adding later that the IMF was ‘right’ to have pointed this out. However, reports indicated officials in Berlin were highly sceptical.

Likewise, analysts adopted a cautious attitude in response to the proposals.

“Whatever the reason, these latest proposals could potentially being a strong leap forward, assuming the institutions don’t find they are filled with holes, which they have on numerous occasions in the past,” wrote Craig Erlam, Senior Market analyst at Oanda, in a research note e-mailed to clients.

Erlam added, “Another issue remains the differences in views between the IMF and the EU on the need for debt relief in order to ensure debt sustainability, with the latter refusing to consider it at this stage. The best we can probably hope for here is a restructuring of some kind including the offer of lower interest charges.”

Acting as a backdrop, on Thursday RBS strategist Alberto Gallo said: “There is some complacency in bond markets vis-a-vis a Grexit. To think that Grexit would be an isolated event, or that Greece would thrive with the Drachma, is somewhat naïve.”

As of 08:02, the yield on the benchmark 10-year Italian government bond was down 15 basis points at 2.03%.