European markets rally as fresh hope for Greek deal emerges

European markets jumped today in response to new hopes that a deal to avert a Greek default may still be on the table, despite an emergency summit between the Greek government and the country's creditors and Eurozone leaders in Brussels ending without agreement.

Global stocks and European bonds rose ahead of the emergency summit, with the Stoxx Europe 600 Index closing at 2.3% higher this afternoon and Greek stocks rising 9%.

The effects were felt elsewhere in Europe with the German, French and Spanish stock markets all closing around 3.8% higher, and Britain's FTSE 100 up 1.7%, suggesting that European investors are confident that a deal is just over the horizon.

Greek Prime Minister Alexis Tsipras today met with the heads of the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF) ahead of a meeting this evening with 19 eurozone leaders. The cash-strapped country submitted new proposals for reforms in the early hours of this morning, reportedly making some concessions on VAT and pensions which have been major sticking points in the deal talks, leading to tentative hopes that a formal agreement may soon be reached.

Greece must unlock a further €7.2bn from its creditors, part of which will be used to repay the €1.6bn IMF loan which is due at the end of June. If it does not manage this and instead defaults, the country will face bankruptcy and the country could be ejected from the euro and possibly leave the EU. Despite these high stakes, the last few months have seen tense but unsuccessful negotiations between Greece and the 'troika' of the IMF, EU and ECB, leading to much frustration and fraying of tempers but little progress.

The uncertainty surrounding these talks has been reflected in European markets and has also led to Greek bank deposits falling sharply since Syriza came to power in January 2015. Since the beginning of the year Greece has seen a total of about €44bn in deposit outflows. On Friday alone €1.5bn was withdrawn from Greek banks according to the Financial Times, bringing the total withdrawals for that week to €5bn, prompting fears of a flight of funds and the possibility that capital controls would be introduced.

However, before the weekend the ECB extended the amount of emergency liquidity assistance (ELA) available to Greek banks by around €1.75bn, allowing lenders to continue to keep up with withdrawals for the time being.

Although this evening's meeting with Eurozone leaders has yet to begin, the general feeling from Brussels today suggests that any final decision will be made later this week. The leaders issued a statement welcoming the new proposals from Greece calling them "positive steps" and indicated that they would hold a meeting later this week, a sentiment mirrored by European Commission president Jean-Claude Juncker.

In an interview with the BBC this afternoon, Greek economy minister George Stathakis said he believes there will be a deal "within days" and that he's confident that the country's new proposals will lead to a break in the five-month deadlock surrounding the negotiations.

However, some ministers have been less optimistic about the progress made over the last 24-hours, pointing to a document mix up which resulted in Athens initially sending the wrong proposals to creditors last night and delaying proceedings.

At lunchtime today, Germany's finance minister Wolfgang Schäuble told reporters: "We haven't received any substantial proposals until now. I can't see how we can be able to prepare the euro summit without proposals. It's not possible to prepare a statement for the euro summit, the status hasn't changed since Thursday."

Ireland's finance minister Michael Noonan also voiced his frustration about the situation: "There was such confusion in the night, with alternative versions coming in... We are still not quite clear what the actual proposals are."