Creditors

Following meetings with EU officials and then with IMF chief Christine Lagarde and ECB chief Mario Draghi on Wednesday evening, Greek PM Alexis Tsipras is back at it on Thursday, in a frantic attempt to salvage a deal with creditors. He'll need to win over EU finance chiefs (who are collectively losing their will to keep Greece in the currency bloc) and the IMF as the EU summit kicks off in Brussels.

Just when you think we have finally hit "peak farce" this happens:

NO EUROGROUP AGREEMENT IN SIGHT ON GREECE: EU OFFICIAL
EUROGROUP HAS BEEN 'INDEFINITELY SUSPENDED:' EU OFFICIAL
EUROGROUP MAY RECONVENE ONCE GREECE PROPOSAL RECEIVED: OFFICIAL

• This headline needs updating: Creditors set bailout ultimatum for defiant Greeks (Reuters)
• Greece’s Fragile Banks Leave Alexis Tsipras Few Options in Bailout Talks (WSJ)
• Dueling Greece Plans Presented as Ministers Race for Aid Deal (BBG)
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• ECB holds Athens lifeline unchanged as Bundesbank protests (Reuters)
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Chaos reigns, with contradictory headlines pushing and pulling futures in any one direction, only for the next headline to undo the previous one. And only headline scanning frontrunning algos have any chance of trading any of this...

The renewed optimism that's surrounded Greek debt negotiations since Monday evening evaporated like deposits on a hot summer day in Athens this morning as the IMF has indicated it will stick to its "red lines" on pension cuts and the VAT, meaning PM Alexis Tsipras will either surrender unconditionally or embrace an EMU exit.

- We need a free market in currencies, not bail-ins and a war on cash and gold - People blindly trust “experts” so welcome that some of them giving prudent advice regarding diversification - Currencies of creditor nations – Norway, Switzerland, Singapore, Hong Kong will outperform in long term

"Even if a deal between Greece and its creditors is struck, the problem isn't solved," warns Saxobank CIO Steen Jakobsen, which leaves the door open to a snap election being called shortly and a referendum on continued membership of the EU just weeks later. Debt refinancing will be the first issue, with the country needing a significant discount. But how can the country secure that, asks Jakobsen, when the government is unwilling to bring in significant reforms?

And it started off all so well: the market, blissfully ignoring what we wrote just yesterday in Why The IMF Will Reject The Latest Greek Proposal In Just Two Numbers, was in full blown levitation mode overnight when it sent Japanese stocks to their highest close since 1996 (pre dot com) and with the Chinese central bank doing its best to keep levitating local stocks away from the abyss, pushing the SHCOMP up another 2.5%. Euro Stoxx 50 went from flat to down 1% and is bouncing. As BBG's Richard Breslow adds, predictably, the market is taking this as a ploy, not an end game. Of course, this is precisely the "Bear Stearns is fine" conventional wisdom that Cramer was spewing days before Bear failed because nobody could fathom how anyone can conceive of a worst case scenario. Only it isn't nobody: we reported before of a Goldman's "Conspiracy Theory" Stunner: A Greek Default Is Precisely What The ECB Wants. 

Who could have possibly foreseen that the IMF would throw up all over the Greek "proposal"... aside from this post here "Why The IMF Will Reject The Latest Greek Proposal In Just Two Numbers" yesterday afternoon of course. In any event, moments ago Bloomberg reported that just as we wrote here yesterday afternoon, there is no deal and that Greek PM Alexis Tsipras told his associates that creditors not accepting equivalent fiscal measures has never happened before, according to a Greek govt official, who asked not to be named in line with policy. Creditors “not accepting parametric measures has never happened before. Neither in Ireland, nor in Portugal, nor anywhere. This strange stance can hide two scenarios; they either don’t want an agreement or serve specific interests in Greece.”

Just as we warned earlier in the year, total uncertainty about the future of Greece has enabled a growing sense of moral hazard as "if the nation doesn't pay its debt, why should we" sweeps across the troubled nation. As Greeks' tax remittances to the government, which were almost non-existent to begin with, have ground to a halt, so The FT reports, so-called 'strategic defaults' have become a way of life among Greece's formerly affluent middle-class..."I still owe money on the car and motorboat I can’t afford to use. Even a holiday loan I’d forgotten about...I’m living with my mother looking for work and waiting for the bank to come up with another restructuring offer."

Never a dull moment in Euro-land!

But it was all looking so great based on the market's all-knowing discounting mechanism of idiot algos. Despite Merkel's comments on "no discussion of restructuring" and Schaeuble's dysphoria over the proposals, a Greek Minister's overconfident "Greece is rescued" comment is about to be crushed by Lagarde's heavy hand:

IMF DISAGREES WITH GREECE ON CORPORATE TAX, VAT AND PENSIONS - EU SOURCES

Yeah - but as they say - apart from that The IMF loved the Greek Proposal!?

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With an agreement in principle on the table, Greek PM Alexis Tsipras now turns his weary eyes towards Syriza party hardliners whose support he will need in order to pass the new deal through parliament. Should the political stalemate prove intractable, Greece may need to call a referendum or snap elections.

• Greek offer to creditors runs into angry backlash at home (Reuters)
• Tsipras Seeks to Stave Off Greek Defections Over Aid Plan (BBG)
• Austria finmin says no agreement on Greek proposals without concrete plan (Reuters)
• Another ELA raise, this time under €1 billion: ECB raises emergency funding for Greek banks (Reuters)
• Greek energy, foreign ministers divided on Russia gas deal (Reuters)
• China’s Plan for Local Debt Amounts to a Bailout (WSJ)
• Key Democratic senators back plan for trade legislation (Reuters)
• South Carolina Governor: Time to Furl Flag (WSJ)