The one catalyst which sent the EURUSD (and thus its first derivative, the SPX) surging on Friday was the Guardian story that Germany, Sarkozy and most importantly, the ECB, have reached a consensus over the form of the second Greek bailout. In the immediate aftermath, Greece, sensing European weakness, announced that it would seek to pass the Troica plan however with substantial changes, a development which prompted us to say that "now that Merkel has effectively thrown in the towel to her, and the CDU's, political reign by agreeing with the ECB's and France's demands, a move which will be brutalized by Der Spiegel in T minus 5 minutes, the fact that Europe blinked to Greece's bluff, just may mean that every demand out of Greece will be met." Well, sure enough here is Der Spiegel, however instead of seen as bending over to Greece, Germany appears to have had a dramatic change of heart, and told not only Greece to take its demands and shove them, but the ECB to go fornicate itself.

Per AFP: "A German compromise plan to resolve a dispute with the European Central Bank over the Greek rescue that was reported by Der Spiegel magazine is no longer on the table, a government source said Sunday. Der Spiegel had reported ahead of its Monday issue that the German finance ministry called for a beefed-up version of Europe's temporary bailout mechanism lending to Greek banks to insure they have adequate collateral with the ECB. Germany's share of guarantees would climb to 246 billion euros from 123 billion euros, according to the report. But a German official, who spoke on condition of anonymity, said that while "several options" were being debated to involve private creditors in an Athens rescue, the reported proposal was "no longer on the agenda". The source added that the initial plan had differed from the reported proposal in "key aspects". German officials say they seek a plan with as few "unwanted side effects" as possible." Naturally, key among these being the perception that German is a toothless power, happy to invite inflation now that wanton Euro printing will be the next step in the bailout chain of command. And so the ball is back in the ECB's court which will have to scramble once again to prevent Jean-Claude Jun(c)ker's greatest nightmare: the 20 big figure plunge in the EURUSD predicted by John Noyce earlier.

The ECB has repeatedly warned that requiring creditors to swap existing Greek debt for new bonds with longer maturities could amount to a default, something which could send shock waves through the European and global financial systems.



German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed Friday to a plan through which private bondholders could volunteer to buy new government bonds to replace ones that matured.



This "rollover" option was favoured by the ECB and France, since it avoids the risk of rating agencies declaring Athens in default.



Germany had previously called for full-scale debt restructuring but Merkel appeared to back down after the meeting with Sarkozy.



Eurozone finance ministers were to meet in Luxembourg later Sunday for talks on saving Athens from default as early as next month.



Merkel said in a separate interview released Sunday that she was upbeat about the eurozone despite the Greek crisis.



"We are already far better equipped now in Europe," Merkel told Super Illu magazine, referring to austerity measures taken by debt-laden member states.



But she said the countries sharing the euro still had to work through "significant failures" and "sins of the past" in terms of fiscal discipline.



Merkel said Greece had "achieved a great deal in the last year -- we should recognise that".

Enjoy the remaining several hours of FX peace. War may be coming as soon as 5pm.