Greece Lobs a Hail Mary ... Markets Remain on a Knife's Edge

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With the clock rapidly ticking down to zero, Greek officials lobbed a Hail Mary today.
Specifically, they proposed additional tax increases and spending reductions to secure urgently needed aid from their European creditors. The new plan would modify pensions and value-added taxes in such a way that would mollify Europe, but also not provoke a backlash in Prime Minister Alexis Tsipras’ own Syriza party.
Euro-zone finance ministers didn’t sign off on the proposals at their emergency meeting today. It broke up without a concrete deal. But the head of Europe’s finance group, Jeroen Dijsselbloem, took a much more optimistic tone in post-meeting comments – suggesting a deal may be reached before the week is out.

Greece’s Syriza party has submitted a proposal to creditors in an effort to prevent a collapse of the country’s finances.

Markets were clearly happy at the renewed signs of progress. Stocks jumped around the world, while credit markets calmed down, too. But the flood of money out of the Greek banking system showed no sign of letting up.
Withdrawals were so heavy in the last two business days that the European Central Bank had to raise its Emergency Liquidity Assistance limit again by roughly 2 billion euros. That was the third such hike in less than a week. Official capital controls haven’t been implemented … yet. But banks are “unofficially” limiting withdrawals to 3,000 euros, according to some reports.
Bottom line: Markets remain on a knife’s edge. We can easily swing 100, 200, or more points, depending on the latest batch of headlines coming out of Europe. Frankly, I’m sure you’re as sick of this as I am – and would rather get resolution one way or the other ASAP. The good news is, that appears to be forthcoming over the next couple of days.

Source:
Mike Larson
MoneyandMarkets