Greece’s initial surrender to the Eurozone governments officially became a rout on Monday. Greek Prime Minister Alexis Tsipras was forced to accept an austerity package going far beyond the original demands he had rejected a week ago.
This beggars the question why Mr Tsipras showed so much defiance, including holding a referendum that went against the austerity measures, and alienating even sympathetic members of the Eurozone ensemble, if the end product was an acceptance of conditionalities that now include external Brussels’ control of much of Greece’s fiscal policy.
Either Mr Tsipras terribly misjudged the willingness of the other Eurozone governments to see Greece be expelled from the single currency or, though it seems unlikely, he felt he needed to show Greek voters that he would not surrender without a fight, before he surrendered.
It is impossible to see how Greece, with or without the third bailout, could ever reduce the debt to manageable levels. There was also considerable sense in letting Greece leave the euro and use a consequent ability to control the value of its own currency to work its way out of debt.
But creditor nations, from Germany to Slovakia, faced domestic anger at the idea of even a partial debt write-off. Mr Tsipras faced the fact almost no Greeks wanted to leave the euro — and trusted his motely collection of radical lefties and rightwingers to manage a new currency. So, it became a political battle with both sides having one hand tied behind their backs. But an Angela Merkel could survive a Grexit at home, Tsipras could not. So the latter had to surrender.
The Greek drama within the Eurozone has more acts to go. Mr Tsipras’ political problems at home will now begin. He must sell the new austerity package to his own party, many of whose parliamentarians are in an open rebellion.
German Chancellor Angela Merkel and the other Eurozone governments will have to do the same. Bureaucrats will now have to implement the agreement, including salvaging a nearly insolvent Greek banking system.
When passions have cooled, the creditor governments will need to find the means to reduce the debt burden. And Greece will need to understand and implement many of the reforms demanded by Brussels for its own good. Its economy is in a mess because of its incompetence — its euro problems have only exacerbated an economy that was already dysfunctional.
This is a lesson other governments should learn from Greece: Getting your own house in order is the best means to survive any future neighbourhood breakdown.