Greece's bailout talks are getting even more sour - and snap elections could be round the corner

It feels like Europe has been in the 11th hour of Greece's negotiations for several months now - the endgame seems to be a series of false peaks. It looks like the climax is close, only for it to edge away at the last minute.

That's certainly true of the last week. After fraught negotiations to get a deal done by today so that Greece could make its payment to the International Monetary Fund, Athens has decided to bundle its June payments into one and make them all at the end of the month - adding more than three weeks to the length of Europe's psychodrama.

Prime Minister Alexis Tsipras was initially thought to be returning to Brussels for further talks. That's no longer happening.

It's not clear what will be done during the few weeks. The Financial Times got hold of Greece's own proposals to reduce its debt burden to 60% of GDP by 2030, and Germany's Tagesspiegel released the country's full series of proposals to its creditors. Neither is particularly promising in terms of the possibilities for a quick deal.

Here's a snippet from Deutsche Bank's Early Morning Reid email that shows how sour relations currently are:

A statement from the Finance Ministry said that 'after four months of negotiations, creditor institutions submitted proposals which can't solve the riddle of the economic crisis caused by the policies implemented in the last five years'. In a call between Tsipras, Merkel and Hollande, Tsipras was said to have told the Creditors that the proposal put in front of him could not be a basis for a deal and was not reflective of the progress made in talks in Brussels. Merkel's comments last night that 'we're still far from reaching a conclusion' and that 'we still have to wait a bit' is a clear sign that large gaps remain between the two sides

The weeks before the new deadline (June 30) have fuelled speculation that something else is coming next - snap elections, or a referendum.

Most of the people seemingly calling for an election are hardliners like minister Dimitris Stratoulis, but either an election or referendum could help Tsipras to whip his party into line - if he wins on his own terms, rebellious backbenchers won't be able to suggest he's rejecting his electoral promises. Of course, if it doesn't go his way, the situation could become even more chaotic.

Here's a snippet from BNP Paribas' latest note (emphasis ours):

There are many Syriza MPs who publicly say they will not support a deal that violates the main lines of Syriza's programme. A few of them have been calling for snap elections in case of no agreement...

The number of dissenters within Syriza will determine what comes next. A referendum could still be used as a way to put more pressure on potential dissenters and renew Syriza's mandate, but time is running out for Greece and it is unclear whether a referendum will still be possible if it is not announced in the next few days (it would likely require 2-4 weeks to organise).

In short, if there's going to be an election or a referendum, they better announce it soon.

Here's a helpful chart from BNP Paribas illustrating the different possible scenarios: