Greece claims debt deal reached with Brussels, 'staff level' accord to be drawn up

Greece has reached an agreement with Brussels over the country's debts, according to a Greek official, but the EU said officials were "not yet" drafting a final accord.

The Greek government official had said "procedures to draw up a staff-level agreement are beginning" at the Brussels group of credit negotiators, according to wires from Reuters and Bloomberg.

A staff-level agreement, which is close to a full deal but will need to be finalised, would also include a long-term solution on Greek debt, the official said.

However, an EU official countered that creditors were not yet drafting a final accord and were still working towards an agreement, with some differences still remaining before a final accord could be signed.

Giving some indications of the eventual shape of the accord, the Greek official said that deal would include a low target for the primary surplus in the first year and no recessionary measures.

Greek bank deposits were said to be safe, the country will need to change its pension system but it will not be required to cut pensions, the source claimed.

The official said that a "problem with the differing stance among the institutions", namely the International Monetary Fund (IMF) and the EU, was a key delay.

"If an agreement by the IMF was not needed, the deal would have closed by now," the official said, according to Reuters.

Earlier on Wednesday, the IMF's Olivier Blanchard told German newspaper Handelsblatt that the Eurozone can handle a Greek exit.

As of 15:17 the yield on Greece’s benchmark 10-year bond was 35 basis points lower to 11.54%.

The news also set off a sudden move higher in the Footsie, which rose 75.95 points to stand at 7,024.65 points, and the Germany's Dax, which spiked around 100 points to 11,750 and maintained this despite the EU clarification.

Spain’s Ibex 35 also snapped higher on the news, gaining 1.4% to 11,400.8.

Brenda Kelly, head analyst at London Capital Group noted that the push higher in equity indices "does tend to prove that the risk-off attitude in European markets was Greek related".

"As yet, with EU officials not yet drafting a final accord, we question whether this is the end of the story and whether this spike in equities can be sustained. It has now been decided that the Eurozone could withstand Grexit. Timing is everything."

Jonathan Loynes at Capital Economics pointed out that the experience of recent months suggested 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 such, this looks at best like just a starting point for the next round of negotiations."