Both the Euro and the eurozone have been terribly damaged by the all night row which has produced for Greece terms which are identical to the kind of sovereignty loss arising out of military defeat. It retains control of its streets but not of its economy. Moreover what is demanded is very bad for Greece and her sympathisers and very good for Germany and her allies. Above all it is a demonstration that there is no such thing a the euro as a single currency shared. It is Germany’s currency used by others on condition they stick to German rules. And the notion that the EU is a democratic union of free people is a tarnished aspiration unsupported by events. What has been done will not work; first because financially it makes no sense. Second it is politically it is unsustainable because it humiliates and grinds a desperate people into an austere darkness from which nobody has any clue how they can emerge.
This cannot work because none of the endless bailout money stays in Greece. 90% of all the bailouts thus far have gone to repay previous loans. The Eurogroup is lending money on humiliating terms in order to repay itself, so as to disguise the fact that Greece is and always has been from the very beginning, bust. To admit that would reveal to their voters that they had lost all their money. The rot started at the height of the global financial crisis. If Greece had defaulted many if not most European banks would have been in trouble. So Greece was bailed out to save those banks, including German ones. But this violated a basic principle without which capitalism cannot work.
It is the principle of failure triggering renewal. There is a mathematical certainty when an entity of any shape becomes over borrowed; it cannot continue and must go back to square one. This enforces a natural order because the lenders lose as much as the borrowers and that fear is supposed to prevent irresponsible lending. But with Greece the lenders were protected by public money which has now been lost, but which Germany refuses to acknowledge.
To reboot a busted economy money has to be printed and the ECB should have been allowed to do that to reboot the Greek economy right at the very start of this saga. Germany said no and that violates the very nature of what a currency is. Instead of becoming an enabling measure to oil the workings of economic activity, it becomes a meaningless impediment which grinds economic activity to a halt, because there is not enough of it. When the oil runs dry the engine seizes.
The next stage will not be financial but political. Europe is now headed for a political crisis from which it may not be able to survive in its present form. Many might say it does not deserve to. Because what is being done by frightened and exhausted politicians is profoundly shocking to fair minded people everywhere. Bit by bit they will start to raise their voices. It will get very noisy.