The technocrats sat up all night haggling at the Athens Hilton, crossing their t’s and dotting their decimal points. The Greek party emerged in the morning to announce that they had struck a deal with the creditors. There is a three-year, €86bn bailout on the table, in place of brief bridging loans. The two sides are no longer slinging rhetoric at one another, but instead agreeing on specific actions with remarkable speed. An early Greek exit is looking less likely, and the casual observer might even imagine that the long and winding saga of the eurozone debt crisis is at last approaching resolution.
Such hopes are deluded. For one thing, the deal may not be as solid as it looks. In the looking-glass eurozone world, technicalities are agreed in advance of the broad political terms, and Berlin – which still shows some interest in denting Alexis Tsipras’s political stock – was today playing for time, insisting that there was no rush in agreeing formal sign-off. More fundamentally, the structural weaknesses of the single currency and its democratic deficit both remain unaddressed. Fresh austerity will intensify, not alleviate, the desperate weakness of the Greek economy. The deal may just about allow Mr Tsipras and Angela Merkel to wriggle out of tricky domestic scrapes, but only by allowing each to mislead their respective electorates.
The broad course was set well before the Hilton haggling, at the extraordinary Brussels summit a month ago, where – while still basking in the remarkable success of his anti-austerity referendum – Mr Tsipras was brought down to earth by a shock German threat to force the turbulent Greeks out of the eurozone, unless they immediately did as they were told. The Greek PM simply threw in the towel. Pre-referendum sticking points, fiscal perks for Greek islands and reduced VAT on fuel, suddenly paled beside new extreme austerian demands.
A ludicrous €50bn in asset sales were demanded, sweetened only by the concession that Athens could keep an eighth of the cash, while the majority went to foreign debtors and banks. Mr Tsipras spun this as a sovereign wealth fund, implying investment in a more prosperous future. The reality is more like being forced to sell your house, and then being allowed to hang on to a fraction of the proceeds. Controversial cuts to pensions are coming at speed. The traditional European way was to sneak the nastiest medicine down along with a mouthful of fudge, but no more.
Greece has to legislate explicitly for many painful changes before it will get a cent of the bailout funds. And to grind a wayward nation’s nose into the dust, every last action will be scrutinised by the previously banished monitors from the hated troika of international institutions. Mr Tsipras is left pretending that somewhat revised targets on the fiscal surplus, in truth little more than a retrospective accommodation to the reality of GDP and tax revenues disappearing in the new slump brought about by Greece’s stringent capital controls, represent a major concession. But in Greece’s weird post-referendum mood citizens appear so ground down as to be thankful that somebody thought to take their opinion on something, even if this proved of no consequence, and this appears to be figleaf enough.
Mrs Merkel is left peddling half-truths too, pretending that she has forced a final settlement on Germany’s terms, even though there is no longer any real attempt to deny that the debt relief which Berlin has resisted for so long is on the way. The ruthlessness that her finance minister, Wolfgang Schäuble, displayed in bouncing Greece into total capitulation at the July summit, has done lasting damage to Germany’s reputation for giving Europe a lead that can transcend petty national rivalries.
This week’s “deal” may allow the German and Greek leaders to duck a few local political bullets, but the bombs that threaten the euro more widely have still not been defused.