A Greek deal built on betrayal and cruelty

The deal agreed between Greece and its creditors has no shortage of critics, reports Matthew Partridge.

The eurozone is "turning into a hospice, and the dying patient is democratic self-government", writes Boris Johnson in The Daily Telegraph, in the wake of the Monday morning deal between Greece and its creditors, which saw Germany's "breathtaking" demands largely adopted.

The Greeks should really tell the German finance minister, Wolfgang Schuble, "to get stuffed". But the trouble is that they "don't really trust themselves any more than Schuble does to run their own affairs". As a result, "the agony will go on, with endless deadlines and fudges and semi-disguised bailouts".

The deal "goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief", agrees Paul Krugman in The New York Times. Moreover, it is "a grotesque betrayal of everything the European project was supposed to stand for".

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

While the influence of the French and the International Monetary Fund forced the German chancellor, Angela Merkel, to make limited concessions, "who will ever trust Germany's good intentions after this"? Since "imposing harsh austerity without debt relief is a doomed policy... even a complete Greek capitulation would be a dead end".

On the contrary, says Fraser Nelson in The Spectator, "the deal embodies what the European project stands for: conformity, and agony for those whom the conformity does not suit". The terms might be tough, but "if German taxpayers will be stumping up the cash, then they set the terms". After all, "no one is forcing Greece to accept, so it's hardly a coup'" as some have described it. The real problem is the "cruelty of a one-size-fits-all currency", with the peripheral countries "capsized by being run on German interest rates".

Yet even if you think the deal is "reasonably fair", as Hugo Dixon puts it on Breakingviews, the real problem is that it might not hold. Capital controls "may linger for months, damaging the economy", leaving Greece "trapped again in a downward spiral". Under those circumstances, says a Bloomberg View editorial, the risk is that "a deal imposed under extreme duress, and bitterly resented by most Greeks, won't succeed".

What's more, "the risk that it will poison the whole European project, if it hasn't already, grows by the day". Exit now may be "painful", but "Greece will at least be in command of its own future, with nobody else to blame for its setbacks".

"The short-term pain" of a Grexit "could be immense", says Michael Strain in The Washington Post. But that shouldn't blind us to the "long-term reality... Germany and Greece are different nations with different fiscal policy and different languages, cultures, and politics". So why on earth "would one monetary policy work for both"? While "Greece would still have needed to implement painful austerity and structural reforms", the fact is that "having its own monetary policy would help".

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri