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By Bloomberg

Greece and its creditors closed in on a deal setting out the terms of a third bailout, as discussions in Athens continued into the early hours of Tuesday.

Negotiators focused on details, including Greece’s fiscal outlook and the size of the total bailout, which may end up slightly higher than the 86 billion euros ($95 billion) envisaged, according to two European officials who asked not to be identified because the talks are private. Both sides agreed on a targeted primary budget deficit of 0.25 percent of gross domestic product in 2015, a 0.5 percent surplus for 2016, 1.75 percent surplus for 2017 and 3.5 percent surplus in 2018, Athens News Agency reported.

Discussions with the institutions are “going fairly well,” Finance Minister Euclid Tsakalotos told reporters in Athens late on Monday, according to a transcript e-mailed by his ministry. “There are questions and issues they want to discuss again and again, but I think there should be optimism that we will soon have a deal,” he said. “I don’t know if it will be achieved by tomorrow morning, but soon.”

Greek stocks rose Monday in anticipation that an agreement to free up aid was near, paving the way for national parliaments to vote on the deal before an Aug. 20 payment comes due to the European Central Bank. Prime Minister Alexis Tsipras’s government needs a quick release of at least 20 billion euros just to create a buffer for its banks and to make loan repayments.

Eurogroup Planned

If a deal is reached, Greece’s parliament must then pass the measures required by creditors -- the ECB, the International Monetary Fund, the European Commission and the European Stability Mechanism rescue fund -- before a meeting of euro-area finance ministers tentatively scheduled for Friday.

Steffen Seibert, German Chancellor Angela Merkel’s chief spokesman, told reporters in Berlin that a rapid conclusion of the negotiations on a third rescue was “desirable,” even as he said that any deal must be thorough rather than rushed. Merkel is due back from a three-week vacation to preside over a cabinet meeting in Berlin on Wednesday that will probably deal with progress in Greece.

People are “too pessimistic” about the prospects of success for a Greece deal, Erik Nielsen, global chief economist at UniCredit Bank AG, said in a Bloomberg Television interview.

“I don’t know if it’s going to work but I wouldn’t write it off,” Nielsen said. In any case, Greece won’t leave the euro “because they were out there looking into the abyss and decided they didn’t like it,” he said. “That is not a very big risk.”

The Athens Stock Index, which opened Aug. 3 after being shuttered for five weeks, rose 2.1 percent on Monday in anticipation of a deal. It fell 15.2 percent in the five days ended Aug. 7 to 676.33, just shy of its lowest closing level in three years. A measure of Greek banks fell 58 percent last week after reaching the lowest closing level since 1995 on Aug. 5.