The new proposal from Greece is essentially the same as the European Commission proposal of June 26 and one that was voted against at last Sunday’s referendum.
The new proposal (with a few minor bells and whistles attached) thus on paper seems to be sufficient to clinch a deal.
The problem comes from the fact that the basis for the new proposal has changed and Greece is no longer asking for an extension of the expired 2nd bailout but a much larger 3rd bailout.
Merkel/Germany might be unwilling to agree as funding Greece for at least an additional €60bn would need something more from Greece.
The institutions must now sign off on the new proposal so we might get yet another new proposal before the day is out. It is clear since the leaders meeting Tuesday that it is up to Greece to deliver a satisfactory proposal with the creditors standing firm on their demands.
Unlike 2012, the combination of an ECB firewall and lack of market contagion provide creditors with the confidence that they do not have to sign up to an unpalatable deal.
