Greece has agreed to a deal with its European creditors – a deal which sent the #ThisIsACoup hashtag trending around the world.
So, is this a coup? Has the Greek government surrendered its national sovereignty to a group of foreign politicians?
The short answer is yes. Greece elected its Syriza government with a very clear mandate to reject demands for austerity. It then held a nationwide referendum which delivered a resounding NO to very specific demands for austerity. The Greek people have spoken – and yet, somehow, all those demands for austerity have now been accepted, and Greek prime minister Alexis Tsipras is being described as "a 'beaten dog' whose only remaining option was to submit to the creditors’ will".
The demands being made of Greece are almost laughably granular – they cover things like "Sunday trade, sales periods, pharmacy ownership, milk and bakeries", alongside much bigger issues like pension reform. If national sovereignty means anything, it surely means that countries get to make their own decisions on things like bakeries. So clearly Greece has given up its national sovereignty, and when you give up your sovereignty to a group of leaders who were not elected by your own people, one entirely apposite word for that is "coup".
That said, Greece's democratically-elected prime minister is going to have no trouble getting this deal passed by Greece's democratically-elected government. He might lose the support of a large chunk of his own party, and he might face the wrath of his people, but ultimately almost no one in Greece wants to leave the euro – certainly not on someone else's terms. Tsipras was faced with a choice between two unacceptable outcomes, and he picked the one which would allow Greece's banks to reopen, and allow the country's arrears to the IMF to be repaid. In other words, Greece is at least going to have a functioning economy, now. National sovereignty is all well and good, but nations willingly give up a certain amount of sovereignty every time they join a political union like the EU or the Eurozone.
The real problem with this deal is not that Greece is being asked to sign on to certain conditions before it can receive billions of euros in new money. The European single currency has always had conditions. The problem, rather, is the nature of those conditions. The euro was conceived as a single European currency – something which would bring the continent together, both economically and politically. Now, however, the euro is tearing its constituents apart.
As Wolfgang Münchau explains in the FT, the euro has not been economic good news for pretty much any of its constituents bar Germany. Something designed as a one-size-fits-all currency has become a one-size-fits-Germany currency. Every other country in the eurozone has been forced to live with some combination of an overvalued currency and/or austerity, while the Germans, where the euro is undervalued, have happily been exporting their way to prosperity.
In the early years of the euro, that was OK, because politics trumps economics. Political unity in Europe – the whole reason why the European Union exists in the first place – was seen as the ultimate goal. And when countries started suffering economically, Europe's politicians and central bankers stepped up to loan them cash at below-market rates.
Then those loans started coming due, and everything went to shit.
At this point, no one is happy with the euro. The Greek people, of course, have spoken loudly – but the Germans are just as unhappy, in their own way, at the way in which they keep on "loaning" billions of euros to Greece even though everybody knows that Greece is never going to be able to repay those loans. The Finns almost scuppered this deal singlehandedly; they too have been suffering greatly under austerity. If the euro ever had broad public support throughout Europe, it has so no longer – and Britain in particular is feeling as though it dodged a bullet when by failing to sign on.
The problem, however, is that there is no legal or practical way to dissolve the euro. And so when push comes to shove – as it almost did physically this weekend, over 31 hours of extremely fractious and sleep-deprived negotiations – Europe's leaders have always ended up kicking the can a little bit further down the road, preserving the intolerable for just a few more weeks or months or years. As Matt Levine puts it, "the can keeps getting kicked, but the kicks are getting more vicious. "
This time is different in one big respect, however: involuntary Grexit was very much on the table. The Germans made it abundantly clear that they were both willing and able to kick Greece out of the euro, even if the Greeks themselves wanted to stay in. Up until now, exit from the euro has been unthinkable; from now on in, it's going to be top of mind, whenever internal tensions start rearing up within the eurozone. The impossible has become – clearly, obviously – possible, which means that all of Europe's sovereigns, especially Spain and Portugal, are going to see more volatility than ever in their borrowing costs every time they start pushing back against German demands. "Convertibility risk", in the language of Wall Street, is now a very real thing.
And the country most likely to exit the euro? Is still, very much, Greece. Grexit this weekend would have been suicidal for Greece, which means that the main lesson learned, for all future negotiations, is that Greece needs a Plan B. Tsipras was forced to accept Germany's humiliating demands because he had no other choice. Next time – and you can be sure that there will be a next time – Greece will have its very own Grexit plan, and the Germans will be very happy to call the Greeks' bluff and tell them to go ahead and use it. (That said, France, Italy, and Spain will all want to keep the eurozone intact, so Grexit is far from being a foregone conclusion.)
One possible lesson from the latest round of Greece negotiations is that the technocrats were right. Previous Greek governments might have agreed too easily to Europe's harsh terms, but Syriza's fight was ultimately self-defeating. All that Tsipras achieved, through his belligerence, was even tougher terms – and an even deeper recession.
But there's another lesson to be drawn, which is that Europe has now reached the absolute limits of how far it can violate the will of the people. Greece has said NO, and it will say NO again, and the echoes of that vote will be heard across Spain in December. In a sense, it doesn't matter what Tsipras agreed to in the early hours of Monday morning, because there's absolutely no way that Greece is going to be able to actually deliver on those promises. Reality has intruded into the airless negotiation rooms of Brussels, and it's not going to leave.
The austerity that Tsipras agreed to this weekend will not create the economic growth Greece desperately needs. In fact, from a domestic economic perspective, it will do more harm than good, and everybody in Greece knows it. The grand European project has lost popular support, as the #ThisIsACoup hashtag shows; it lives only through political inertia and the lack of a viable alternative. The can has been kicked much further than anybody thought possible, but it can't be kicked forever. Tsipras might have lost this battle. But the twilight of Europe's bloodless technocrats has clearly begun, and he has surely hastened their eventual demise.