1/ Eurogroup + Eurozone update (long). Many are focusing on the small print (ESM conditionality or not etc.) to explain lack of agreement. Small print is important, but we need to see the big picture here to understand how it's playing out.

2/ Main (objectively major) concern of EZ periphery is: if fiscal expansions are done by design at national level (albeit assisted by ECB and other EU instruments) then that will clearly pose a debt sustainability problem on the day after, no matter how low interest rates.

3/ The ECB has taken major steps, but its PEPP scheme precisely aims to facilitate national governments for financing the fiscal expansion, hence accumulating more debts. Italy et al are asking for an alternative EU mechanism preventing precisely this.

4/ That's where the proposal for Eurobonds (debt mutualization) comes in. Note that (unlike in 2010 or 2012) the letter of some member States to the EC asking for Eurobonds covers ~60% of the EZ's population. Hard for Germany et al to dismiss outright.

5/ Germany et al's proposal on the other hard aims to address concerns of periphery RE unsustainable increase of national debts by suggesting....(ahem) increasing national debts via borrowing from the European Stability Mechanism (ESM).

6/ Beyond the issue of macro/fiscal conditionality for accessing the ESM (obvs an anathema in EZ's periphery) problem is: this solution doesn't address the question and Italy et al's concerns *at all*. That's what the ECB is doing anyway: facilitating national fiscal expansions.

7/ Now you may think that, as in 2010-2015 the strong always wins, and that Italy et al will be forced into something they don't like. But the power dynamic seems totally different. Thanks to the ECB's actions there's no pressing need for Italy et al to *be compromised* timewise.

8/ Given the ECB is facilitating national fiscal expansions in periphery anyway through debt, why would you accept a sub-optimal solution to finance your national fiscal expansion through...debt...by other means? Let alone that we're talking about the 3rd largest EZ economy

9/ Conclusion: maybe I've got this *totally wrong* but it seems to me that the room for compromise @ Eurogroup is extremely small: differences are much, much deeper than simple macro/fiscal conditionality question of ESM (which of course is also important). Ends.