Fonte/Source, NYTimes, For years, Greece’s negotiations with its European creditors have featured moments in which all parties stare into the abyss, fear what they see, and step back to reach a deal.
On Monday, there was yet another deal. But this time it is one that pushes Greece into the abyss, even if financial markets don’t acknowledge it just yet and even if what happens next is deeply uncertain.
Greece already has 26 percent unemployment, a tourism industry that is suffering as would-be visitors stay away, and banks and a stock market that have been closed going on three weeks. Just a week ago, its voters overwhelmingly rejected a bailout offer that was less punitive than the one its leaders just accepted.
Yet the deal that Greek leaders and their creditors reached Monday morning after a brutal series of overnight talks promise to deepen political and economic strains in a country already in depression.
It was a momentous weekend for Europe, and not in a good way. The deal will keep Greece in the eurozone at least a while longer, at great cost, and with little certainty about the future of either Greece or Europe in the not too distant future.
In exchange for a cash lifeline, the country has agreed to much greater concessions than those that were under discussion a few weeks ago. Among them: higher taxes, cuts to government pensions and a sell-off of $55 billion worth of state assets in order to recapitalize banks and make debt payments. That last strategy is a little like a family selling off its furniture to make its mortgage payment; you can do it, but it does not exactly amount to a long-term solution.
A week ago, thousands of Greeks crowded Syntagma Square, in front of the nation’s parliament, celebrating their country’s emphatic “No” vote on a proposed financial rescue. Right and left, old and young, the Greek people were united: They would not accept the further austerity that Germany and other European countries were demanding as a condition of further bailout money.
That seemingly shining moment of democracy has ended disastrously.
The Greek government’s late June decision to suspend negotiations and hold that referendum was both an affront to the procedures of European diplomacy and worsened the country’s economic position (a shutdown of the banking system and negative headlines during prime tourist season have a way of doing that).
Germany and its allies among creditor countries seized on those facts to demand more stringent austerity than had been on the table before the referendum. The logic was that the worse economic situation made Greece’s funding needs higher, and the referendum brinkmanship created a need to rebuild trust with the Greek government.
The left-wing Greek government has pursued a hard-edged, maximalist negotiating strategy, hoping that by pushing to the brink of leaving the eurozone, the other European countries would acquiesce to bailout terms more favorable to Greece. It underestimated how strongly held Germany’s position really was, and how many other countries Germany could pull in to support it.
For five years now, the threat of a Greece exit from the eurozone, with the idea that European unity was more fragile than its leaders had always claimed, was the cudgel that ultimately pulled the parties together to make a deal. But Germany and some of the other Northern European creditor countries (Finland, the Netherlands, Austria) are fed up with this, and are increasingly rejecting the premise behind the last five years of European debt negotiations.
The Germans seem to have done more planning for how to execute a Greek exit than Greece has; the former Treasury Secretary Timothy Geithnerdescribed in his memoir a 2012 meeting with the German finance minister Wolfgang Schäuble in which Mr. Schäuble showed something approaching enthusiasm for pushing Greece out of the eurozone and thus pulling the remaining countries closer together.
The German proposal for a bailout extension explicitly raised the possibility of Greece’s exiting the euro for a five-year period before re-entering, which boggles the mind. As Alex White of the Economist Intelligence Unit tweeted, it is the equivalent of “Let’s divorce, divide up the finances, go our separate ways,” and get married again in five years.
By contrast, all signs suggest that the Greek government, for all its misgivings, genuinely does want to keep the nation in the eurozone. Some reporting indicates that the Greek government led by Alexis Tsipras hasn’t even done much contingency planning for how a euro exit would work, and was expecting Greek voters to accept the creditors’ plans in the July 5 referendum.
Compare the German view of Greece — that it may be time to walk away — with the view led by the other great power of Europe, France, that the eurozone must be unbreakable, part of a one-way march toward a politically and economically integrated continent.
That was the central fight in the overnight negotiations that concluded at 11 a.m. European time Monday. Is this union truly undissolvable, or one in which a misbehaving country with untenable finances must be shown the door?
The compromise was this: France and its allies won the point in that Greece is still nominally part of the eurozone. But the conditions Germany got to punish the country for its misdeeds are so severe that it could easily topple the fragile coalition government in Greece.
France “won” in the sense that the unraveling of the eurozone did not happen on July 13, 2015. But it came at the cost of policies that make it less likely that will be the case one, six, or 12 months from now.
If this counts as a victory for the European project, it is hard to imagine what a defeat would look like.