The Euro Zone Summit forced the Greek Syriza-led government into accepting practically all demands of the other euro zone states. In return, the Greek government received the prospect that negotiations on renewed credit programme might commence and the vague promise that longer grace and payment periods on the Greek debt might be considered.

The measures that are envisaged brush the result of the Greek referendum on 5^th July aside which had shown a resounding “no” to further austerity. The democratic rejection of the Troika policies in Greece made the euro member states to confront the Greek government with even stricter demands than in the past. Within two days, the Greek parliament is to pass a Value-Added Tax reform that will put an additional burden on the poor, first steps of a pension reform plus the institution of quasi-automatic spending cuts in case that certain budget targets are not met. Within another week, the parliament is to pass inter alia a law on the reorganisation resp. closing down of banks in trouble that will curtail the options to deal with a banking crisis. This makes a mock of parliamentary democracy (and it is questionable whether these demands can be met at all). Any serious public debate on issues with long-term consequences is not possible under such circumstances. Quasi-automatic budget cuts take away key powers from parliament and institutionalise permanent austerity.

Further key elements of the programme are large-scale privatisations under EU supervision, the curtailing of labour rights and the de-regulation of services. This boils down to an extremely radical neo-liberal structural adjustment programme. It will previsibly accelerate the economic decline of Greece and will lead to a further deterioration of the already disastrous social situation.

The question is why did the Syriza-led government accept such a programme that is diametrically opposed to its political platform. It seems that the majority of Syriza feared the consequences of leaving the euro zone and possibly even the EU which was the alternative to capitulation. Exiting the euro zone would have been both politically and administratively a Herculean task. The Syriza-led government was apparently not prepared for that.

By accepting the euro zone member states’ demands, Syriza has been strategically defeated. A substantial minority within Syriza has argued in favour of leaving the euro zone rather than to give in to Troika demands. It will probably leave the party. In other EU member states, parties to the left of social democracy from German Linke to Spanish Podemos which have so far argued for creating spaces for alternative policies within the euro zone and the EU will have to reconsider their political strategy. They have tended to fetishize the euro. For example, there has been hardly any debate on the euro within the German Linke. Thus, these parties are not well prepared for the present situation. The Greek experience has clearly shown that there is no space even for relatively moderate left alternatives (and obviously even less for more radical ones) in the euro zone and that even strong national democratic mandates for socially more balanced policies are brushed aside. The European left has been clearly weakened by Syriza’s political defeat.

The nationalist right from Lega Nord to Front National can rejoice. They have taken a stand against the euro zone as part of a nationalist and socially exclusionary project for a long time. They couch the conflict between the Syriza-led government and the EU institution not in terms of a social conflict and an issue of democracy, but in terms of the assertion of national sovereignty against EU institutions. They can present the Greek case as an example on how the EU tramples on national rights. The EU institutions have de facto strengthened the nationalist (far) right as a possible alternative to euro-liberal policies.

During the negotiations rifts became visible in the euro group. It was the German coalition government of Christian Democrats and Social Democrats that took a particularly harsh line. It introduced even officially the proposal of a temporary Greek exit from the euro zone into the negotiations. Thus, the German government demonstrated that the cohesion of the euro zone is not its top priority and that the exit of peripheral euro zone member states is an option that it is willing to contemplate. This can be interpreted as the option of going potentially for a substantially smaller euro zone without the “burden” of the poorer South. The way in which Central East European governments (Slovakia and Slovenia) supported the harsh German stand can be interpreted as vying for being included into such a German-dominated core. The French and Italian governments have shown reservations on the German stance. They do not want the euro zone in its present composition to be put into questions and they are opposed to ever tighter fiscal policies as they are propagated by the German government. However, the French and Italian position has not mattered. The German-French axis which was central to EU policy making for decades does not exist anymore. It is quite obvious that reforms of the euro zone that would seriously reduce gaps between the productive structures North-Western core on the one and the Southern and Eastern periphery on the other hand, and strengthen its cohesion are out of question now. Thus, the disintegrative economic forces that have their roots in the strengthening of the core and the weakening of the periphery will become stronger. The explicit non-commitment of the German government for defending the cohesion of the euro zone will make the economically weaker euro zone economies highly vulnerable to speculative attacks.

The victory of the rigid neo-liberal German stand might prove to be a Pyrrhic victory. Gradual disintegration which has been put on the agenda during the negotiations on Greece is very likely to turn out to be a much messier process than the German Chancellor Angela Merkel and her Minister of Finance Wolfgang Schäuble seem to imagine. For the European left, it will be a crucial question whether they will be able to influence the course which the likely European disintegration process will take.