A week ago we suggested that the second Greek "bailout" was Dead on Arrival. Gradually, the market is starting to realize just that, as schisms are appearing not just between the core and the periphery, but between the two main players: Germany and the ECB, both of which have realized Plan B is doomed to failure. Late in the day, we got another confirmation from the Luxembourg finance minister who just did what the CFTC is now doing with Frank-Dodd implementation - announce indefinitely delays until some miraculous machine from god appears. Well, no machine is coming now or any time in the future. So ahead of tomorrow's day which is shaping up to be critical for Greece, the Eurozone and potentially the entire developed world, here is SocGen's summary take down of all of today's events in preparation for tomorrow.

Greek rescue delayed until July

So we are no further forward. Tuesday’s emergency Eurogroup meeting proved to be inconclusive after euro area finance ministers struggled to bridge the gap between the ECB’s insistence that any private sector involvement must be entirely voluntary and German’s desire to press bondholders to go beyond a Vienna style agreement. While finance ministers going into the meeting had warned that there would be no decision at Tuesday’s meeting, the Eurogroup had been expected to produce a statement reaffirming the ministers’ commitment to agree a new aid package. However, diplomats said there was not enough consensus even for that, with press reports suggesting the Eurogroup was affectively split. As a result, Luxembourg Finance Minister Luc Frieden said an agreement on a second bailout for Greece may be delayed until July. Equally, in an indication that the Eurogroup would wait for the Greek Parliament to pass Greece’s Medium Term Fiscal Strategy (which is unlikely to be voted on until the first week of July) he said “And only if we can assure that all elements of the euro zone, including Greece, can get the necessary aid, we will also help ourselves and that way ensure stability and solidarity.”

“You can’t leave the profits with the banks and make the taxpayers shoulder the losses,” Austrian Finance Minister Maria Fekter told reporters in Brussels today before the meeting. “Ministers have different positions,” she said. “We’ll put them on the table and look at where the compromise lies.” Similarly Finnish Prime Ministerdesignate Jyrki Katainen argued that “Some sort of private sector involvement is crucial in this very moment,” but stressed that any proposal must be “responsible.” “We are in favour of trying to find a responsible solution with private-sector involvement where possible.” Similarly, Belgian Finance Minister Didier Reynders called on banks, insurance companies and others to pledge to maintain their exposure to Greek debt and said the financial sector had a strong interest in a successful conclusion to Greece’s problems. But he said it made “no sense” for finance ministers to draw up a plan that works “against what the European Central Bank wants.” Mr. Reynders also suggested that the total aid package was likely to be around €80bn with the finance ministers looking to raise about €25bn from private sector involvement. These figures would be in line with press reports of the provision agreement reached at the deputy finance ministers meeting in Vienna.

More positively, German Finance Minister Wolfgang Schäuble said there would be no final decision on a plan on Tuesday but that his government “is prepared” to offer further help to Greece. “We will decide on additional measures in coming weeks to back up the measures agreed by the Greek cabinet to reduce their deficit. The priority is improving Greece's capacity to grow,” he said. Greece also managed to undertake a successful auction of 6-month T-bills which potentially indicates that there is still an appetite to roll at least a proportion of Greek debt.

The ECB view meanwhile was reinforced in the European Parliament by Mario Draghi, who is expected to succeed ECB President Jean-Claude Trichet in October. Mr. Draghi said there must be no element of compulsion in any Greek plan. But he said a proposal drawn up along the lines of the Vienna Initiative, which involved creditors voluntarily extending debt maturities for several Eastern European governments during the financial crisis, could meet the ECB's criteria. “The Vienna initiative looks to me to be entirely voluntary,” Mr. Draghi told lawmakers in Brussels at his confirmation hearing for the ECB

presidency today. “The ECB is not in favour of restructuring and haircuts” and it “excludes all concepts that are not purely voluntary,” Draghi said. He added that the “cost of a default would exceed the benefits” and wouldn’t “address the root causes of the crisis.” So the standoff continues. Finance ministers meet again on Sunday for another unscheduled Eurogroup meeting.

Looking ahead, it is not obvious where we go from here. There are still the makings of a new rescue package for Greece on the table but the proof of the pudding will be in the detail. German’s Deputy Finance Minister Steffen Kampeter indicated earlier in the day that Germany wouldn’t go against the advice of the ECB which had raised the prospects of a deal at Tuesday’s meeting. Increasingly however the real challenge is the situation on the ground in Greece. Already in the first five months of the year tax revenues are behind target while public spending is over budget. With Greek unions calling for another general strike in Greece today, it would be staggeringly embarrassing for European Leaders to agree a new package for Greece later this month, only to have to concede that Greece needs even more money later in the year if Greek slips further behind on its programme targets. Hence, while the politicians argue, time may be beginning to slip away from them.