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Euro leaders dangle the ultimate carrot

Is it safe to go back into Europe again? Euro leaders are dangling the ultimate carrot: a third Greek bailout deal.

European stocks are in sold rally mode, with most bourses up 1 to 2 percent, as EU leaders are scheduled to meet at 1 p.m. ET to attempt to hash out a deal with Greece. Bond yields are down in Greece, Italy, and Spain, and up slightly in Germany and France.

The Greek leadership has presented a slightly different proposal in an effort to end the stalemate. Whether it is good enough is unclear. There is less emphasis on cuts in pension spending and increases in value-added taxes and more on closing tax loopholes and raising taxes on corporate profits. Greece is also reportedly offering to raise the retirement age to 67, well above the average retirement age of 63 for men and 59 for women.

Read MoreWhy Greece has a bad hand: Strategist

If a deal is reached, there have been reports the leaders are willing to discuss debt relief as part of a third bailout.

If there is a deal on Greece, even a "kick the can" deal that would extend the bailout for a few months ahead of a new bailout deal, will that cause a resumption of the European stock rally that started in January and fizzled in April on Greek exit fears?

The initial response would seem to support the idea. Germany is more than 10 percent off its April highs, but it has rallied about four percent since the bottom on Thursday on just such hopes. The Vanguard FTSE Europe ETF, a basket of European stocks, has rallied roughly 2 percent in that time period.

Perhaps more importantly, this will reinforce the idea that central banks will always bail out market participants.

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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