Trouble with squash merges

squashtrouble.sh

# Create a fresh repo

$ git init testsquash
Initialized empty Git repository in /Users/jon/Code/Sterf/testsquash/.git/
$ cd testsquash

# Commit a file to master

$ echo foo >> file
$ git add .
$ git ci -m foo
[master (root-commit) 20d8a88] foo
 1 file changed, 1 insertion(+)
 create mode 100644 file

# Create a branch 'a' off of master

$ git co -b a
Switched to a new branch 'a'

# Modify the existing file and commit

$ echo bar >> file
$ git ci -m"bar" .
[a 94ec413] bar
 1 file changed, 1 insertion(+)

# Create a branch 'b' off of 'a'

$ git co -b b
Switched to a new branch 'b'

# Rename the file...

$ git mv file newfile
$ git st
On branch b
Changes to be committed:
  (use "git reset HEAD <file>..." to unstage)

	renamed:    file -> newfile

# ...and alter the contents enough that git can't tell it's a rename

$ echo new contents > newfile
$ git add .
$ git st
On branch b
Changes to be committed:
  (use "git reset HEAD <file>..." to unstage)

	deleted:    file
	new file:   newfile

# ...and commit

$ git ci -m newfile
[b ef9d4dc] newfile
 2 files changed, 1 insertion(+), 2 deletions(-)
 delete mode 100644 file
 create mode 100644 newfile

# Squash merge branch 'a' into master

$ git co master
Switched to branch 'master'
$ git merge --squash a
Updating 20d8a88..94ec413
Fast-forward
Squash commit -- not updating HEAD
 file | 1 +
 1 file changed, 1 insertion(+)
$ git ci -m"a"
[master 0e052b3] a
 1 file changed, 1 insertion(+)

# And try to squash merge branch 'b' into master

$ git merge --squash b
CONFLICT (modify/delete): file deleted in b and modified in HEAD. Version HEAD of file left in tree.
Squash commit -- not updating HEAD
Automatic merge failed; fix conflicts and then commit the result.
$ git st
On branch master
Changes to be committed:
  (use "git reset HEAD <file>..." to unstage)

	new file:   newfile

Unmerged paths:
  (use "git reset HEAD <file>..." to unstage)
  (use "git add/rm <file>..." as appropriate to mark resolution)

	deleted by them: file