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Sunday, July 12, 2015 2:15 PM

Greece Offered "Temporary" Grexit in 4-Page Proposal; Merkel's Choice: "No Deal at Any Cost"; Waterboarding the Ward of the Eurozone

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There was no agreement on Saturday or so far today. And the rift between France and Germany has widened. Yesterday I outlined Merkel's Choice.

Merkel's Choice

  1. Pony up another €80+ billion to Greece and offer debt relief on top of it, even though a majority of German voters would rather see Greece out of the eurozone.
  2. Push Greece out of the eurozone.

"No Deal at Any Cost"

Today Merkel appears to have taken choice number 2. She says "No deal at any cost". Hardliners in Germany, Finland and other places have dug in their heels too as the Rift Between German and France Widens.
Fraught negotiations in Brussels over a €86bn bailout package at the weekend created fresh uncertainty for Greece’s future in Europe’s monetary union after finance ministers failed to agree a way out of the biggest crisis to face Europe since 2012.

French president François Hollande pledged to get an agreement and warned that at stake was not just whether Greece stayed in Europe but “our conception of Europe”.

But a grim Ms Merkel said: “There’s not going to be an agreement at any cost.” Eurozone leaders, she added, were considering “nothing more and nothing less” than the preconditions for a Greece rescue by Europe’s bailout fund — a stance that appeared to cast doubt on whether a full accord could soon be reached.

Highlighting the drama, Luxembourg has warned Germany that pressing for Grexit would bring “a profound conflict” with France and “catastrophe for Europe”. Jean Asselborn, foreign minister, told the Süddeutsche newspaper that it would be “fatal for Germany’s reputation in the EU and the world” if Berlin did not seize the chance offered by the Greek reform promises.
Germany exerted maximum pressure, with the finance ministry raising the possibility of a five-year timeout from the eurozone for Greece, and transferring €50bn of assets to an “external fund” for privatisation to help fund debt repayment. Among Germany’s staunchest allies is Finland, where the populist Finns party threatened to resign from the two-month-old coalition government if a Greek bailout went ahead.
Athens Offered "Temporary Grexit"

Moments ago, the Guardian reported Athens Offered 'Temporary Grexit' If No Deal. Here are some Guardian Snips.

Waterboarding the Ward of the Eurozone
Alexis Tsipras was given a very rough ride in his meeting with Tusk, Merkel and Hollande, our Europe editor Ian Traynor reports.

Tsipras was told that Greece will either become an effective “ward” of the eurozone, by agreeing to immediately implement swift reforms this week.

Or, it leaves the euro area and watches its banks collapse.

One official dubbed it “extensive mental waterboarding”, in an attempt to make the Greek PM fall into line.

Nine Countries Open to Grexit

Economics professor Karl Whelan, of University College Dublin, believes the proposal for ‘temporary Grexit’ shows that Germany is determined to get Greece out of the eurozone.

Proposal: Greece to be offered euro time-out if no deal

The four-page proposal on the table tonight is now circulating in Brussels.

It confirms that Greece could indeed be offered a ‘temporary’ exit from the eurozone if it doesn’t agree a deal with its creditors tonight.

Sky’s Ed Conway has helpfully uploaded all four pages. @EdConwaySky: Here’s the full 4pg eurogroup document on #Greece, inc “time-out”, total amt needed (€82-6bn) & reform proposals.
Unfortunately the pages are totally illegible. So other than knowing there are four pages regarding a "temporary" Grexit, we have little else.

I will post a link to the proposal as soon as I find one. Meanwhile, it is crystal clear that Germany has sponsored policies hoping to bring down Tsipras' government in Athens.

He has decided he wants a deal after all, a very poor decision, in my opinion, especially after the resounding "no" he campaigned for.

One of the demands Germany has placed for a deal is Greece put up €50 billion collateral for further loans, no doubt islands and state-owned enterprises at bargain-basement prices.

Greek citizens are upset, and riot police have been called out, but so far the situation is calm. It won't be if Greece agrees to this deal.

Mike "Mish" Shedlock

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