After a particularly ugly negotiating session in February between German Finance Minister Wolfgang Schaeuble and his then-Greek-counterpart Yanis Varoufakis, Mr. Schaeuble concluded that the two sides had "agreed to disagree." Mr. Varoufakis, barely concealing a smirk, said the description was not quite accurate: "We didn't even agree to disagree."
Five months later, it looks like Mr. Schaeuble's description has emerged as the most accurate. All sides have agreed to disagree on the merits of Greece's new bailout, its third since 2010 and one with a headline figure of €86-billion ($123-billion Canadian). That's why it is doomed to fail. Grexit now or Grexit later, the outcome is just a matter of time.
The disagreements from all corners are not a matter of interpretation. They were plainly stated.
Mr. Schaeuble openly campaigned for Greece to take a "timeout" from the euro, a polite term for banishment, presumably on the assumption that the 18 surviving members of the euro zone would be better off without a perennial deadbeat and tax evader rotting away on its southeastern flank (never mind that a Greek exodus would trigger a default that would cost German taxpayers a fortune).
The International Monetary Fund, one of Greece's three main creditors (the others are the European Union and the European Central Bank), philosophically disapproved of the bailout because it did not think that Greece will ever be able to repay its Mount Olympus of debt, so what was the point of shovelling more debt onto the pile? The opening sentence of its July 14 report on Greece's debt said: "Greece's debt has become highly unsustainable."
Greek Prime Minister Alexis Tsipras, who was elected on an anti-austerity platform, only to perform a humiliating U-turn two weeks ago to save Greece's banks from destruction and to preserve Greece's use of the euro, claimed he was "blackmailed" into accepting the new bailout agreement.
The Greek people overwhelmingly voted No in the July 5 referendum, which asked voters to accept or reject the creditors' loans-for-austerity offer, only to have that offer reluctantly endorsed by the Greek parliament.
In other words, the new bailout has no "buy in," to use a term beloved by management consultants. Even worse, it has no local ownership. The reforms and austerity are being imposed on Greece by the EU (read: Germany). The creditors, which may or may not include the IMF, will even have full oversight of a fund that will attempt to raise €50-billion by snatching up and privatizing what the creditors called "valuable Greek assets." Greeks wouldn't be surprised if the Acropolis is thrown in to make sure the targets are met.
To assume that a third bailout will succeed when the previous two utterly failed is to assume that: a) Greeks will suddenly tomorrow love the economic reforms and austerity measures they hate today; b) Greece's economy will, Lazarus-like, miraculously rise from the dead, softening the blows of austerity; and c) Germany will cut Greece any slack when the reform and financial targets of the third bailout are not met. Pigs will fly and fish will take up bicycling before any of these scenarios becomes reality.
In the end, all the sides will revel in the perverse pleasure of seeing the deal unravel, pushing Greece out of the euro zone (one hopes in a negotiated exit that somehow manages to keep the banks and the hospitals open). Mr. Schaeuble's "timeout" proposal would come to fruition. Greece would default on the debt that the IMF had warned was unsustainable. The Greek government would get its sovereignty back and a chance, through the devaluation of its own currency, to pull its economy out of recession even if the shock of shedding the euro would deepen it for some time.
More than a few economists think the new bailout will mark only a temporary reprieve for Greece.
"Even once a deal is secured, it is extremely unlikely it will be implemented," says Manulife chief economist Megan Greene, who has done much of her writing from Athens. "Greece certainly has no ownership of this bailout. I fear that Greece has only two choices: 1) Sign up to a third bailout, lots more economic pain, implementation falls off track, Grexit; 2) Grexit."
So why did Germany and Greece agree to terms – there is no firm deal yet – that neither side wanted?
My guess is that it had more to do with geopolitics than any sense that Greece needed tough love to turn itself around. The Americans piled pressure on the EU to keep Greece inside the tent for fear that, outside the tent, it would fall victim to imperialistic Russia or the spreading chaos of the Middle East. France and Italy may have wanted Greece to stay put to preserve the integrity of the euro zone but, in the end, each supported Germany's hardline austerity stance, depriving Greece of any potential allies. France and Italy have large, populist anti-establishment parties – Marine Le Pen's Front National and Beppe Grillo's Cinque Stelle – that would only become emboldened had Mr. Tsipras's Syriza party been allowed to shape bailout terms to its liking.
The euro zone is not supposed to be held together with cynical glue. It is supposed to be held together for mutual benefit, for peace, prosperity and common vision. At some point, there will be another version of the Greek crisis, though potentially far more destructive if it hits Italy or Spain. The EU and Germany completely botched the Greek rescue file. Unless they learn from their mistakes, the next crisis could be fatal to the euro zone.
Eric Reguly