How cunning was that plan?

Photographer: Kostas Tsironis/Bloomberg

Tsipras Has Vandalized Greece

Marc Champion writes editorials on international affairs. He was previously Istanbul bureau chief for the Wall Street Journal. He was also an editor at the Financial Times, the editor-in-chief of the Moscow Times and a correspondent for the Independent in Washington, the Balkans and Moscow. He is based in London.
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What has Alexis Tsipras achieved for the Greek people?

Monday morning, after 14 hours of talks among the euro area's finance ministers and an additional 17 hours among the group's leaders, the Greek prime minister came away with a much worse deal than the one he just persuaded Greek voters to reject. Now he must sell it to his parliament and people.

To be clear, for all the previous overheated talk of Greece's "humiliation" by the euro area countries that were bailing it out, this deal is indeed humiliating for Tsipras and Greece. The decision to set up a fund into which the country has to place 50 billion euros ($55 billion) worth of assets for privatization is the kind of thing that courts do to bankrupt companies ruled no longer competent to manage their own recovery.

QuickTake Greece's Fiscal Odyssey

The demand that Greece's parliament must, within three days, legislate for measures the government has in the past described as "criminal" and "terrorist" only underscores the degree to which Greece's economic sovereignty has been suspended.

No matter what the parliament decides and whether Greece ultimately stays in the euro or leaves, Europe will pay a price down the road for such a vengeful act. Many Greeks are enraged, and the prominent role played by Germany in driving such a harsh bargain has awakened old stereotypes, which the European Union and its common currency were designed to dispel forever.

Related: Greece Default Watch

Right now, however, it is Tsipras whom Greeks should blame. Consider where the country was a little more than a year ago, when his political party Syriza burst onto the scene by winning Greek elections to the European Parliament. The party argued that, were it not for the supine approach that the country's then center-right government was taking toward its creditors, Greece could end austerity measures, return to prosperity and keep the euro. That was not true, but it was attractive.

Times were still very tough for Greece in 2014. In April of that year, however, the country returned to international bond markets for the first time in four years, selling 3 billion euros worth of five-year securities at an interest rate of 4.95 percent. Unemployment, having hit a high of 27.5 percent in 2013, was falling. By April 2015, the latest available figure, the jobless rate was 25.6 percent.

Economic growth had also returned to positive territory, hitting 1.7 percent in the fourth quarter, a rate substantially higher than the 0.9 percent euro area average, according to Eurostat.

I'm not arguing here that all would have been rosy, were it not for Tsipras and Syriza. The euro area needed then, and still needs, to come to terms with writing off Greek debt. Yet it's hard to call what has happened in Greece over the past year anything but a self-inflicted act of economic vandalism.

By the second half of 2014, Tsipras's political promises were popular enough to prompt former Prime Minister Antonis Samaras to hold back on fulfilling some of the required bailout terms. He forced early elections in an attempt to regain support for sticking with the bailout, arguing correctly but unsuccessfully that the alternative would be for Greece to exit the euro.

Greece then lost its ability to borrow in the market again. Over the past six months, the four-year benchmark bond has traded at an average yield of just under 16 percent. And while the data aren't yet available to track Greece's unemployment and output over the past few months, they have certainly turned negative -- especially since the imposition of capital controls forced the economy into a hard stop.

Last year, Greece's banks were solvent. Throughout 2013, confidence about the country's place in the euro grew, and people were bringing money back to deposit. As Syriza rose and the political situation became less certain, however, confidence in Greece's economic future began to wane. This year, those flows have turned sharply negative, gutting the financial system from within and forcing it onto life support at the European Central Bank.

As a result, even a less punitive bailout deal would have put Greece in a worse position, because the cost of digging out of its financial hole has risen significantly.

Syriza's false promises have brought the erstwhile fringe party once-unimaginable political success. Yet after gaining power, the party eviscerated an already weak economy, bankrupted the financial system and caused untold needless hardship to the very people Syriza claimed to speak for: the poor.

Tsipras gambled with his country's fortunes, betting that the rest of the euro area would be so fearful of creating a precedent for an exit that they would capitulate to his demands and write him a blank check. The strategy reached its apogee with his absurd July 5 referendum, in which he asked Greeks to vote against the latest bailout proposal, while again promising that this would not put Greece's euro membership at risk. He has now capitulated, apparently aware that he has no mandate to leave the euro. And so his lie is exposed, together with its cost to the Greek people.

Greeks have ample reason to be mad at their euro area partners, but they should hold their own prime minister responsible for destroying their economy in a reckless political experiment. Regrettably, this is not over. As a result of the prime minister's actions and Europe's brutal response, Tsipras -- or a successor Greek government -- may yet get a mandate to abandon the euro.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Marc Champion at mchampion7@bloomberg.net

To contact the editor on this story:
Mary Duenwald at mduenwald@bloomberg.net