The deal struck in the wee hours of July 13—Bastille Day Eve—between Greece and its Eurozone creditors has been described in some quarters as a compromise. It was not. It was nothing less than a humiliation of a small and suffering member state, a sadistic display of naked financial power. Do as we say or we will “collapse your banks,” Eurogroup Chairman Jeroen Dijsselbloem had apparently told Greek negotiators earlier. In the climactic weekend it emerged that he wasn’t bluffing. Despite the fact that the ‘No’ vote had scored a resounding victory in a national referendum a week earlier, Greek Prime Minister Alexis Tsipras decided he had no choice but to surrender to all the creditors’ demands, but in the end it turned out that even unconditional surrender was not enough.
Germany’s implacable finance minister, Wolfgang Schäuble, saw weakness in his opponent and went for the jugular. He insisted on “guarantees” that Greece would keep its word, including sequestration of Greek assets in a fund under his control. No such guarantees had been demanded previously, but now Chancellor Angela Merkel, who had previously seemed less exigent than Schäuble, declared that Greece had forfeited the “trust” of its European partners. In the end she proved to be a good German but not a good European.
France and Italy at long last found the courage to put up mild resistance. Italian Prime Minister Matteo Renzi told Germany that “enough is enough,” and French President François Hollande said he would not tolerate “Grexit,” as Greek exit from the Eurozone has been called. Schäuble had for the first time formally proposed Grexit in the form of a five-year “time out” from the euro, but of course it cost Germany nothing to sacrifice this demand in exchange for Greece’s agreement to effectively place itself in receivership for the foreseeable future.
German domestic support for showing Greece no mercy was strong, reportedly as high as 70 percent according to some polls. But when the dust settles, Germany’s victory may prove hollow. The harshness of the penalty imposed on Greece for its insubordination may have wrecked the European Union. For one thing, “Brexit”—UK withdrawal from the European Union, on which Britain is to hold a referendum next year—has suddenly become more likely. Privately, even some on the left in Britain are now saying that they may join Tory Euroskeptics in voting against a European project that no longer makes sense to them.
France and Italy envisioned the euro originally as a way of restraining a reunified Germany. But instead of limiting German power, the euro has multiplied it. Currency union has deprived member states of budgetary autonomy. The European Union was conceived after World War II to moderate nationalist tensions and animosities, but the German insistence on austerity has exacerbated them instead. Resistance to this loss of sovereignty has triggered nationalist and populist reactions across the continent, and the remarkable intransigence that Germany displayed this weekend will do nothing to quell fears of its renewed assertiveness. The gloves have come off. Even within Germany there has been shock at the absence of compassion. Sigmar Gabriel, the leader of the social-democratic opposition party SPD, fully embraced the line of his coalition partners Schäuble and Merkel, triggering a reaction by his own party’s left wing that the Frankfurter Allgemeine Zeitung described as a “shitstorm against ‘dear Sigmar.’”
In France, Hollande may have fortified his position slightly with his belated discovery that France’s interests are not identical to Germany’s. Until now, he has devoted himself unswervingly to “preserving the Franco-German couple,” which the French like to think is at the heart of European construction. But the crisis has revealed how much Europe has been changed by its enlargement in recent years. The euro has delivered immense economic power to the countries with current account surpluses, Germany foremost among them. Power has slipped out of the hands of “the Franco-German couple” and into the grasp of ad hoc alliances that Germany is able to form with smaller countries on an issue-by-issue basis. The Greek crisis has mercilessly revealed an entirely new realpolitik. Marine Le Pen had already increased her party’s share of the electorate by relentlessly attacking the EU. The events of the past few days have made it increasingly difficult to counter her arguments by simply insisting on the need to preserve the European project—a project whose implications are increasingly being questioned.