WITH barely a week to go before the expiration of Greece's bailout arrangement with its creditors, the two sides appear to be finally close to a deal that will, for now at least, enable Greece to avert a default that only last week loomed so large.

Although a final agreement has yet to be reached, European officials have reacted positively, albeit cautiously, to Greece's latest submission of its planned reforms. Whether there is an agreement or not should be known by the end of this week, after the creditors - the IMF, the European Commission and the European Central Bank (ECB), the so-called "troika" - scrutinise the Greek proposals, and after another round of meetings of the eurozone finance ministers and heads of government over the next two days.

The odds are in favour of an agreement and the markets have been quick to seize on this probability. European bourses have surged, stocks of Greek banks have jumped 20-25 per cent in the last two days, and Greek bond yields have dropped. An agreement will unlock much-needed financing for Greece and should enable it to meet immediate payments to the IMF, ECB and other creditors - 1.6 billion euros (S$2.4 billion) is due to the IMF by next Tuesday. While there will be relief that the twin disasters of default and "Grexit" have been averted, this will amount to just a temporary reprieve in what is likely to be a long-running economic and financial drama.