Portugal

The global financial system desperately needs a big, bloody sovereign default - a profoundly disruptive financial event capable of shattering the current rotten regime of bank bailouts and central bank financial repression. Needless to say, Greece is just the ticket: A default on its crushing debt and exit from the Euro would stick a fork in it like no other. But don’t count on the Greeks.

When you owe someone $340, it is YOUR problem.
When you owe someone $340 BILLION, it is THEIR problem.

If Greece gives in, Germany will have won, but its bully status will come to bite it in the face. European nations don’t accept bullying, and certainly not from Germany. It’ll be a Pyrrhic victory: the beginning of the end. If Greece however stands firm in its demands, it’s also curtains for the EU. If Greece leaves, it won’t leave alone. Only the third option, Germany caving to Greek demands, can save the EU. But Merkel and Schäuble have prepped their people to such an extent with the wasteful lazy Greeks narrative that they would have a hard time explaining why they want to give in. The EU may thus fall victim to its own propaganda

I assume that the overall costs (and risks) of Greece saying "Goodbye To All That" are considered too high by both the Eurogroup and the new Greek government. (In practice: a 5- day bank holiday, issuance of Drachmas, the conversion of euro assets into Drachmas and the announcement that 90% of outstanding debt will no longer be honoured.)  Eventually, there will be a compromise aimed primarily at gaining time. The Eurogroup will continue to allow the minimum financing of the Greek state ("extension") and say that they will need time to think how a "debt restructuring" could like like. Mr Tsipras and Mr Varoufakis will be content having secured "bridge funds" for another 6-9 months while still in possession of the trump card "Grexit".

"European leaders resolved a bitter financial dispute with Greece today, paving the way for Spain and Portugal to join the Common Market at the start of next year. Prime Minister Andreas Papandreou of Greece had threatened to veto an agreement reached this week on Iberian membership unless the other nine members gave Greek farmers $2 billion in special subsidies to help them compete with Spain and Portugal. But after two days of negotiations at a European Economic Community meeting here, Greece was persuaded to accept about $1.4 billion in new agricultural aid in return for lifting its veto threat."

- March 31, 1985

In another 'odd' event for Europe's status quo, for the second time in a week, tens of thousands of pro-government supporters have taken to the infamous Syntagma Square in Athens to ensure Syriza knows exactly what tomorrow's 'negotiations' are all about. With the latest poll showing Syriza in an even more dominant position nationally (45.4% vs ND's 18.4%) and Merkel's party looking like it will lose in a landslide in Hamburg local election, it seems the people of Europe have expressed their will. As Germany's Sinn suggests, Grexit would be best, "if Greece doesn't exit the euro, it will keep adding new debt it will be unable to repay." Perhaps that is why the rally cries of "Give Greece a chance" are so loud...

The 2015 World Press Freedom Index highlights the worldwide drastic decline in freedom of information in 2014. The rise in overall violations of freedom of information was evident in all continents, but for America - the bastion of press freedom in the land of the free and "the most transparenet administration ever" - fell once again... to 49th!!

Essentially, our analysis suggests that there is a large divergence in the perceptions of both sides but the rational choice is to hold to their respective positions. In other words, our analysis of the payoffs suggest that the EU won’t offer debt relief and Syriza won’t back down from demanding it. Our fear is that the markets, inured by previous bailouts, expect the Greeks to cave, leaving the risk of an unexpected negative outcome in Europe is probably higher than what is currently being discounted. At the same time, EU policymakers are assuming that contagion will not occur, which may not be accurate.

The usual bag of tricks no longer works. And the subject Varoufakis brings to the table, that the EU and ECB economical policies have been an abject failure is no longer an extreme notion. The contagion from Syriza success can be considerable, and though it pretends otherwise, the EU has no idea what it would mean down the line. Every single option they look at that is NOT Varoufakis surrendering, must scare them out of their socks. Anything they give up will be seen as a sign of weakness, and it will encourage parties for which Syriza ‘carries the torch’, and likely raise their support and votes.

It looks reasonable that investors would not ask for an additional compensation for a source of risk that has limited direct economic bearing for other asset classes.... Such a conclusion would cease to hold, in our view, if Greece were to leave the common currency. Indeed, ‘Grexit’ would constitute a non-diversifiable event, affecting all financial assets. This is because, upon the departure of one of its members, EMU would likely be seen as a fixed exchange rate arrangement between countries which can elect to adhere or leave. Convertibility risk would resurface, exposing the possibility of a collapse of the entire project.

Since the anti-austerity Syriza party's victory in Greece's recent general election, the “Greek problem" is again preoccupying markets and policymakers throughout Europe. Some fear a return to the uncertainty of 2012, when many thought that a Greek default and exit from the eurozone were imminent.

The only question on traders' minds today, with the lack of any macro news out of the US (except for the DOE crude oil inventory update at 10:30am Eastern expecting a build of 3.5MM, down from 6.33MM last week, and the 10 Year bond auction at 1pm) is which Greek trip abroad is more important: that of FinMin Varoufakis to Belgium where he will enter the lion's den of Eurogroup finance ministers at 3:30pm GMT, or that of the foreign minister Kotzias who has already arrived in Moscow, and where we already got such blockbuster statements as:

LAVROV: RUSSIA WILL CONSIDER AID REQUESTS, IF GREECE MAKES THEM; KOTZIAS: GREECE IS WILLING TO MEDIATE BETWEEN EU, RUSSIA

Or perhaps both are critical, as what happens in Brussels will surely impact the outcome of the Greek trip to Russia?

So far it has been largely a repeat of the previous overnight session, where absent significant macro drivers, the attention again remains focused both on China, which reported some truly ugly inflation (with 0.8% Y/Y CPI the lowest since Lehman, just call it deflation net of the "goalseeking") data (which as usually is "good for stocks" pushing the SHCOMP 1.5% higher as it means even more easing), and on Greece, which has not made any major headlines in the past 24 hours as patience on both sides is growing thin ahead of the final "bluff" showdown between Greece and the Eurozone is imminent. The question as usual is who will have just a fraction more leverage in the final assessment - Greece has made its ask known, and it comes in the form of 10 billion euros in short-term "bridge" financing consisting of €8 billion increase in Bills issuance and €1.9 billion in ECB profits, as it tries to stave off a funding crunch, a proposal which will be presented on the Wednesday meeting of euro area finance ministers in Brussels. The question remains what Europe's countrbid, if any, will be. For the answer: stay tuned in 24 hours.

The time for the final all-in bet has arrived.