Europe close: Stocks end in the red as Greece asks Eurozone for third bailout

European stocks ended a choppy session firmly in the red on Tuesday, while the euro lost ground against the dollar, as investors digested the latest twist in the seemingly never-ending Greek debt saga.

The benchmark Europe Stoxx 600 index and Germany’s DAX closed down 1.3%, while France’s CAC 40 ended 1.6% lower.

Losses in the periphery were less pronounced, but indices there had fallen the most in the previous session. Italy’s FTSE Mib ended 0.5% weaker, while Spain’s IBEX 35 lost 0.8%. The Greek stock market and the country’s banks will remain closed this week.

In currency markets, the euro slipped 0.3% against the dollar by the close of European markets, to $1.1200.

Late on Tuesday and just a matter of hours before its current bailout expires, the Greek government put forward a new two-year bailout deal with the European Stability Mechanism.

This would be to "fully cover its financing needs and the simultaneous restructuring of debt", according to a translated press release from the office of the Greek Prime Minister.

The new proposal came in the form of a letter written by Greek Prime Minister Alexis Tsipras to Eurogroup chief Jeroen Dijsselbloem.

Dijsselbloem later tweeted that there would be a teleconference at 1800 BST to discuss the "official request" from the Greek government.

“Maybe the closure of banks, first reports about petrol shortages and news that some pensions for self-employed can no longer be fully paid in euros are helping to get the radical left in touch with reality? Maybe Tsipras has finally noticed that Europe is not bluffing. But has he really shifted his position?” said Holger Schmieding, chief economist at Berenberg.

Schmieding said the letter appears to have serious problems, namely that it comes extremely late, does not say that Greece is accepting the conditions set by creditors for extending the current bailout, and essentially asks for a third bailout before the second one is up.

“The IMF needs to be on board. Otherwise, a deal could not be ratified in Germany and quite a few other Eurozone countries. Europe cannot commit to a third bailout for Greece when Greece is still refusing to meet the conditions for concluding the second bailout. You cannot default on your bank and ask for a new loan at the same time. Taken at face value, this Greek proposal is a non-starter,” he said.

Meanwhile, German Chancellor Angela Merkel said Germay will not consider a third bailout package proposed by Athens before Sunday's referendum in Greece.

“Eurozone finance ministers cannot simply shred this request from Athens for a new bailout; they have to give it serious consideration,” she said.

On the corporate front, Pernord Ricard fell after saying it expects slower growth this year.

Elsewhere, shares in LVMH Moet Hennessy Louis Vuitton dropped after Bank of America Merrill Lynch cut its rating on the stock.

On London’s FTSE 250, Ocado was in focus after posting robust growth in revenue and operating profits, driven by a 30% rise in new customers and a 19% increase in active customers in the first half.