Greek offer to end default crisis a day late and €€ short

Markets around the world, including the futures market for the US, leaped upward overnight on word that Greece had largely accepted the last proposal from the European Union to end the default crisis and keep the Greeks within the Eurozone.  Investors should have looked before they leaped. Reports first assumed that the letter from Greek PM Alexis Tsipras mainly capitulated to the EU’s last position, but it contains significant changes to that proposal. The Financial Times reports that the Germans aren’t buying it. The German finance minister, Wolfgang Schaeuble, dismissed it — and its request for another €29.1 billion bailout — as “no basis” for continued negotiations.

Plus, as CNN Money explains, the offer comes literally a day late, and figuratively many euro short:

But it won’t spell the immediate end of Greece’s financial crisis, even if the about-face is given a favorable reception by the country’s creditors.

That’s because the only mechanism for Europe to hand over rescue loans expired at midnight. And Greece defaulted on a payment to the IMF Tuesday.

The eleventh hour passed yesterday, in other words. The EU needed to negotiate an extension by the end of the day yesterday in order to avoid having to go back to their parliament to authorize a new bailout system. With Greece defaulting on its IMF payment yesterday, getting the EU to provide a new legal mechanism for another fiscal rescue will be a difficult task, and the IMF certainly won’t go out of its way to extend more credit either.

The Wall Street Journal also reports that the new offer from Tsipras won’t work for creditors:

“If Friday’s proposals (from creditors) are the baseline, these measures would significantly increase (the) fiscal gap,” said one official. “And lots of clarifications would be needed on other aspects,” the official added.

A second official said that the proposals from Mr. Tsipras are a weakening of the measures that have been discussed and would not be well received by the three institutions that oversee eurozone bailouts—the European Commission, the European Central Bank and the International Monetary Fund. A third official echoed that assessment.

Tsipras has called for a referendum on the EU’s proposals as a show of Greek defiance to the austerity measures the EU insists Greece use to restore stability to its participation in the Eurozone. Those polls may end up backfiring on Tsipras, though, as the No position has lost significant ground after the bank closures:

In the first poll figures published since Mr. Tsipras shocked Europe by calling a vote on Sunday, 46% said they back the “no” vote.

But support for the “no” vote had been much higher, at 57%, before Greek authorities imposed capital controls and closed banks.

The data, put together by pollster ProRata and published in the daily newspaper Efimerida ton Syntakton, showed that 37% of respondents backed “yes” vote. Support for the yes vote was just 30% before the decision to shut banks this week.

It might be a moot point now anyway, thanks to the expiration of the bailout system and the default on IMF financing. The Greeks would be voting on a proposal that literally won’t exist any longer. The bank runs have brought the realities of default and socialist ruin to voters in Greece, which their new government has managed to accelerate.

Europe might just shrug off the Greeks after this; Germany in particular sounds pessimistic about even bothering with more negotiations. The Financial Times also notes that the Eurozone economy has managed to keep growing despite the crisis with Greece, although unemployment remains high, which may give the EU enough confidence to let the “Grexit” run its course: