Eurozone

In one of the shorter Eurogroup meetings in recent history, the Greeks came bearing nothing and today's "final, final, final" "last chance for a deal" conference ended just after 2 hours in. The Greeks may come back tomorrow bearing a new proposal but at this point it is rather clear what the endgame is. In a few moments expect Diesel-BOOM to explain why nothing got done again, and why it's on the Greeks if the Eurozone dominoes start falling next.

For every loser there is a winner, and in the case of Greece and its tragedy, just as millions are about to lose everything, a few not only made billions but quietly, under the guise of "sovereign bailouts" transferred their entire risk onto the taxpaying public.

At this point it is unclear who wants Grexit more: the ECB or Greece.

1. A new program requiring very major structural reforms of the Greek side, and much larger than the last Juncker proposal.
2. Introduction of parallel currency, primarily through promissory IOU.
3. Controlled bankruptcy and leaving the euro

ECB’S RIMSEVICS SAYS INTRODUCTION OF ANOTHER CURRENCY IN GREECE IS MOST REALISTIC SCENARIO, MAY BE ONE LESS EURO ZONE MEMBER IN FUTURE

Today's "final" Eurogroup meeting is yet another "last" chance for Greece to stay in the Euro according to Greek headlines. The meeeting begins in minutes, at 12:30pm CET/7:30am Eastern so expect the usual torrent of "Greek deal" headlines which send the S&P surging followed by prompt denials which the S&P algo soundly ignore. By now the game is quite familiar to everyone.

• Greece faces last chance to stay in euro as cash runs out (Reuters)
• Tsipras Begins Brussels Campaign to Keep Greece Inside the Euro (BBG)
• Greek Crisis Shows How Germany’s Power Polarizes Europe (WSJ)
• Eurogroup Head Dijsselbloem Calls for ‘Credible’ Greece Package (BBG)
• Europe Not Playing ‘Domino Theory’ Leaves Markets Calm on Greece (BBG)
• China stocks fall again despite support measures (Reuters)
• Chinese Trading Suspensions Freeze $1.4 Trillion of Shares Amid Rout (BBG)
• Crude Creeps Higher After Downturn (WSJ)

With Greece’s debt situation spiraling downwards, the European project is showing some cracks. The July 5 referendum could end up amounting to a mandate on whether or not Greece stays in the euro. In the meantime, the turmoil offers an opportunity for Russia to advance its interests... and with The Krlemlin reporting that Putin held discussions with Hollande today, it appears something is going on behind the scenes.

France has managed to use the Greek bailout to offload €8 billion in junk debt onto its neighbors and burden them with tens of billions more in debt they could have avoided had Greece simply been allowed to default in 2010. The upshot is that Italy and Spain are much closer to financial crisis today than they should be.

Should markets fret, and ECB action becomes necessary then we think the markets will price ECB action well before highly stressed levels. If we for instance take it view of the monetary policy stance impact seriously then market moves that take real yields to levels that persisted before the ECB started easing policy (negative rates started in Jun 2014) may be a trigger point.

"My concern is not just that markets are mis-pricing Greece contagion, mis-pricing deflation, mis-pricing street liquidity and mis-pricing the (now negative) trend in corporate (US) revenues and earnings (Q2 earnings season is upon us and may well show year-over-year earnings down 5%/5%+). My concerns are also that markets are way too optimistic about global growth (especially the US), about China, about the ability of policymakers to do anything new and/or effective to alter things meaningfully to the upside,"

Now that Yanis Varoufakis has metamorphosed from economist academic to controversial finance minister to political martyr, the eyes of the financial universe will turn nervously to newly-appointed Euclid Tsakalotos, who has led Greece’s negotiations with creditors since Varoufakis was sidelined after making a scene at an April Eurogroup meeting in Riga.

According to Colin Lancaster, senior managing director with Balyasny "we now have another 48 hours of calm before things really start happening", and the punchline: "situation could then break down as banks stay closed, ATMs will run out of cash Tuesday or Wednesday, uncertainty grows and rioting possible."

"When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations. ... Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. Neither after the First nor the Second World War. However, it has frequently made other nations pay up... "