Greek crisis: Four questions we still need answers to

 
Emma Haslett
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Tsipras has said Greeks have given him a "mandate" to reduce austerity - will they accept new concessions? (Source: Getty)

European stocks rallied again this morning, after it appeared negotiations between Greece and its creditors went well last night, with European Union President Jean-Claude Juncker saying he's "convinced" a deal will happen this week.

But only the next act will show whether this was always going to be a Greek tragedy, or whether it was more of a farce.

There are still plenty of questions to be answered. Here's a few:

1. How will Greek voters react to the latest proposals?

As Prime Minister Alexis Tsipras has pointed out on a number of occasions, by electing him the Greek people gave his party, Syriza, a mandate to do away with austerity. The latest concessions from Greece to its creditors - which include increasing employers' pension contributions and hiking VAT on restaurants - are unlikely to go down well with its voters. Or, indeed, some of the harder left politicians.

2. Will Greece's other lenders accept the new proposals?

Greece owes cash to the European Central Bank (ECB), the European Union (EU) and the International Monetary Fund (IMF). While the EU's Juncker was downright enthusiastic about the prospects of making a deal, IMF boss Christine Lagarde was rather more cautious, saying only that the two sides had a "lot of work" to do, in very little time.

Reports throughout the negotiation process have suggested the IMF was rather more hard-nosed than its counterparts - and there's still a chance the organisation may not accept how Greece has costed its own proposals.

3. Does this mean no capital controls?

At least twice in the past few days, the ECB has hiked the ceiling on its Emergency Liquidity Assistance (ELA) programme, essentially increasing the amount of emergency cash Greek banks can call on. However, it's been reported that Greeks placed orders for €1bn of withdrawals yesterday. Will the ECB keep raising the ELA ceiling, or will capital controls need to be introduced to prevent Greeks from withdrawing more cash?

As Cyprus found out, once capital controls are in place, it's very hard to reverse them, so you can see why the Greek central bank is doing everything in its power to avoid them. So far, they've avoided it - but every day counts.

4. When will reality bite back for Athens stock investors?

Stocks in Athens finished yesterday nine per cent higher as news from Brussels began to look more positive - then the index continued its rally today, rising 2.4 per cent by the mid-morning.

But what goes up must come down: even if there is a deal, any new austerity measures could hit institutions, retailers and lenders. This rally is unlikely to continue forever.

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