Greece and Brussels cut a deal, but at what cost to the 'European project'?

The European Union may have sealed a last-minute deal to save Greece from crashing out of the eurozone. But the wrenching and polarizing negotiations that got it there have left a Europe riven by ideological divide, resentment, and above all, mistrust.

And ironically, at a time when far-right and far-left parties have surged, testing the EU's founding values, it is the Continent's political mainstream that has arguably done the most damage to the bloc’s credibility.

The arrangement hammered out today is far from done. And it is just one of many difficult challenges that lie ahead for the EU – from its cohesion on Russia to the refugee crisis to the Euroskeptics in its midst. The EU will confront those even as opposing camps form among all the eurozone players – from the Greeks, the French, and the Italians, who have warned Germany and its backers about being unnecessarily draconian, to those in northern Europe who feel burdened by playing the role of "paymaster."

While both narratives are grounded in reality, says Matthieu Segers, an expert on European integration at Utrecht University in the Netherlands, “both are untrue at the same time. The challenge for the eurozone will be to find a way to discuss the middle ground between these two positions.”

The positive spin

As leaders emerged bleary-eyed from 17 hours of talks this morning, they sought to put a positive spin on a bailout deal that will save Greece from immediate economic collapse, including urgent negotiations toward a funding gap and providing as much as 86 billion euros over three years. In return, Greece must move immediately to enact hugely unpopular reforms – from value-added taxes to pension reform – that the public rejected in a referendum just last week.

But implicit in the deal is an utter lack of trust in Greek Prime Minister Alexis Tsipras, whose brinksmanship – including that snap referendum – has dismayed Europe. He now must present to Greeks a reality that is bleaker than the conditions they faced before he took office in January, promising an end to austerity.

Germany, as the leader of Europe, has also lost credibility. In an unprecedented backlash, the country was painted as overly hawkish and rigid, and in some circles as downright malign. Many blamed German Finance Minister Wolfgang Schäuble for being as radical and intransigent as his Greek counterparts, and Chancellor Angela Merkel, typically, known as the "Teflon" leader for her ability to wade through crises unscathed, became a target as well. 

#ThisIsACoup was Twitter's second top-trending hashtag Sunday night, as many reacted to what they considered impossible demands of Athens, including that Mr. Tsipras draft – by Wednesday – new laws on everything from pension reform to a fund to manage Greek assets and repay its debt. And Nobel laureate and economist Paul Krugman took Germany to task in a New York Times blog that called the deal “a grotesque betrayal of everything the European project was supposed to stand for."

Greeks, who wanted overwhelmingly to stay in the eurozone, are digesting the deal with ambivalence today. They now face a tougher standard of reform than they did before Tsipras called the referendum last Sunday, effectively aborting negotiations toward an earlier agreement. It is now largely seen as a monumental miscalculation that hardened the creditors' stance.

The terms, whose supporters included smaller nations in the Baltics and Central Europe, were built around the lost trust that many blame on Tsipras and his Syriza party. “There has been a lot of poison injected into the whole eurozone project in the last month,” says Mr. Segers. “The Greek government made an ideological issue of the negotiations. They dismissed the whole project as a neoliberal capitalist conspiracy against the people.”

A bitter aftertaste

European Commission President Jean-Claude Juncker tried to get beyond the divisions this morning, saying that "I don't think the Greek people have been humiliated, nor that the other Europeans have lost face. It is a typical European arrangement."

But it’s one that has increasingly been infused with a defensive, nationalist tone – something that European officials will have to counter in order to regain confidence in their leadership. “There were so many wounds and so much damage done over the past week that no one walks out of this a clear victor,” says Stefan Kornelius, foreign editor at Germany’s daily Süddeutsche Zeitung. “In the end, the eurozone was kept together, but you can’t have many of these types of victories. It is wearing down the eurozone.”

Regardless of which side advocates were on, the tone of the negotiations has cast a pall over European capitals. The front page of the Guardian this morning reads, “Europe takes revenge on Tsipras.”

“Germans made it look that Europe must be German, and if not, tough,” says John Kornblum, a former American ambassador to Germany in Berlin and longterm observer of German politics.

In France, leftist leader Jean-Luc Melenchon wrote on Twitter Sunday in the heat of negotiations: “For the third time in history, a German government is in the process of destroying Europe.”

But Ulrich Speck, a visiting scholar at Carnegie Europe in Brussels, says the divisions are overstated. He says that Germany took a risk in being so hawkish, but in the end Ms. Merkel got what she wanted – a stringent deal that keeps Greece for now in the eurozone. 

“She can go home and say, we did our best. We have a tough deal. So I think this could bring back trust,” Mr. Speck says. And, he adds, “Greece still has a lot of trust in the EU, because they want to stay.”