It is a sign of low expectations in the handling of the Greek debt crisis when a deal to keep the country from chaos for four months at the most and only 72 hours at the least is hailed as a great breakthrough.
After four weeks of brinkmanship, the eurogroup of finance ministers and Greece’s Syriza-led government emerged on Friday night with an interim pact that should stave off disaster for a while.
In the sense that it avoided catastrophe, the agreement was good for both sides. The bailout money will continue to come, and the European Central Bank will stand behind Greece’s banking system, for the time being. But grandstanding and mutual accusations of bad faith during the talks have done needless damage to the reputation of Greece’s government. They have also dimmed the prospects of a constructive agreement in June when the four-month extension runs out.
The final contours of even this interim deal are not yet clear. The Greek government has been working over the weekend to produce a revised list of budgetary measures for the eurogroup on Monday that it will implement in return for continued financing. Athens will have to work hard to come up with something sufficiently different from its current borrowing conditions to satisfy Syriza’s voters, roused by the continued defiant rhetoric of Alexis Tsipras, the prime minister, while pleasing its creditors.
In any case, the outcome will inevitably look closer to that demanded by those creditors — the eurogroup of finance ministers, the ECB and the International Monetary Fund — than those of Greece.
Syriza has wasted goodwill and political capital during these talks. Given the reported exit of deposits from Greek banks over the past few weeks, it has also weakened its financial system and hence its resilience to future discord. What is apparently state-of-the-art game theory looks to an untutored eye like needlessly eroding trust and alienating potential allies.
Describing the debt of its fellow troubled country Italy as unsustainable and trying to score political points with the European Commission’s attempts to broker a compromise has endeared the Syriza government to no one. Germany also made a serious public relations blunder, unnecessarily rejecting a revised Greek offer out of hand last Thursday before reversing and coming to agreement the next day.
Greece’s position when talks resume in four months will also have been undermined by the reactions of investors and savers in the past few weeks. Greek assets themselves have taken a battering, stocks falling and sovereign debt spreads rising on increasing expectations of Greece leaving the euro. Reports suggest that Greek banks, which saw a rapid outflow of deposits during an earlier iteration of the crisis in 2012, have again experienced significant withdrawals.
By contrast, financial markets more generally in the eurozone, together with risk assets worldwide, appeared remarkably unmoved by the imbroglio. The strain of thought in some northern European countries that the eurozone would be better off without Greece will only have been strengthened by the prospect that such a move could be managed without disastrous wider consequences.
What happened last week was not a victory for anyone. Assuming Monday’s exercise in setting new conditions succeeds, the Syriza government and the eurozone have four months not just to decide what permanent deal is possible but to work out a far better and more constructive way of reaching it.
This article has been amended since initially published.
Get alerts on Greece debt crisis when a new story is published