We have a Greek deal – but how long will it last?

Europe seems to have finally agreed a deal with Greece. But, says John Stepek, the Greek crisis, and the whole folly of the eurozone, is unlikely to have a happy ending.


Angela Merkel: "The most important currency has been lost, and that is trust"

"I love deadlines. I love the swooshing noise they make as they go by."

I'm not sure that Douglas Adams, much-missed author of The Hitchhiker's Guide to the Galaxy and the source of that well-known quote, would have been so keen on Greek deadlines.

Greek deadlines don't so much swoosh by as drag themselves along the ground with a grim sense of inevitability.

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And yet it seems we now have a deal.

So how long will this one last?

A deal for Greece?

We'll get a better idea of where we stand as the day goes on. But it sounds as though Greece has capitulated, basically, in return for the promise of another bailout package.

Part of this involves Greece creating a €50bn asset fund through privatisation, half of which will be used to recapitalise the banking system.

Later today, the European Central Bank (ECB) will decide on whether to expand its emergency loans if it does, the Greek banks could reopen for limited service.

The tricky thing, of course, is going to be getting all this past the national parliaments. Greece's in particular, given that the people essentially voted against this deal just a weekend ago.

Greek prime minister Alexis Tsipras has to pass six reforms through the Greek parliament by Wednesday. These include, says Reuters, "spending cuts, tax hikes and pension reforms". That sounds like all the things the people just voted to throw out. Tsipras' labour minister has already gone on telly to object to them, arguing that they will lead to new elections later this year.

So it's not at all inconceivable that we'll be revisiting this for a whole new series of Greek deadlines at some point in the near future, though I do hope not.

The eurozone is a folly of breathtaking arrogance

This is what happens when you share a currency. You lose control of your monetary policy, and therefore a vast chunk of economic policy. It can only work if you all agree to abide by certain rules. These rules go way beyond simply using the same coinage.

This is all even more pertinent in today's world. Our politicians have ceded a great deal of responsibility for the economy responsibility that should remain in the hands of elected officials to central bankers. As a result, we have unelected officials making decisions that redistribute wealth from one section of the population to another.

That's bad enough when it's the Bank of England, or the Federal Reserve, which are at least answerable to British or American politicians. It's far, far worse when it's the ECB, in which Greek politicians inevitably have very little say.

In short, if you give up your currency, you give up your sovereignty. And this goes for Germany just as much as Greece. If Germany wants the euro to work, then it needs to be willing to help out the likes of Greece, just as Greece, in exchange, needs to be willing to follow certain rules.

So the euro really only works if you create a United States of Europe. Preferably before you introduce the currency. But ask the average citizen of Europe if they want their country to be downgraded to a state within the USE and I suspect the answer will be a firm "no".

No wonder the euro's creators tried to avoid giving any of their citizens a vote on whether to join or not!

Given that Britain is struggling to hold together a 300-year-old currency union between only four countries, how much harder will it be to keep the eurozone together, even if Greece manages to stay in?

Europhiles often make the point that this project isn't about economics. It's about peace. My question to that would be: do you think the Greeks and Germans like each other more today than they did in 2000?

As German chancellor Angela Merkel put it: "The most important currency has been lost, and that is trust". She was just complaining about the Greeks of course but the destruction of trust was an inevitable consequence of the euro being foisted on European electorates. And it won't have a happy ending.

For some of the most intelligent commentary on the eurozone, you should check out my colleague Merryn Somerset Webb's interview with Bernard Connolly. It's from a few years back but it only becomes more pertinent with each and every Greek deadline that slouches by.

John Stepek

John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.