BERLIN — Last September, then-Greek Prime Minister Antonis Samaras traveled to Berlin to ask Angela Merkel for a favor.

Sitting across from the German chancellor in her vast office, Samaras said his government was prepared to follow through with the remaining reforms it had committed to, but wanted looser conditions and more time. The alternative was political upheaval, he warned.

“Merkel said ‘no,’” recalled a former Samaras aide.

In the nine months since Merkel sent Samaras packing, the leftist Syriza movement has taken power and the economy has gone into a tailspin.

Even if Greece manages to secure a twelfth-hour deal with creditors this week, the chaos of the past months has reversed much of the headway the country made in recent years. Before Syriza came to power, the European Commission had forecast 2.5 percent growth for Greece this year. Now it expects just 0.5 percent, a forecast some economists say is too optimistic. Fixing Greece will require more money and more time than its creditors anticipated.

Merkel has won high marks at home and abroad over the past five years for her management of the Greek crisis. But with Greece again on the brink of collapse, her decision last fall to play hardball with Athens raises the question of whether she miscalculated.

“It was a misjudgment,” said Erik Nielsen, chief global economist at Italy’s UniCredit. “The probability now of this being resolved in a way that people can believe Greece is on the right track is virtually zero.”

‘Delicate fruits of success’

At the time of Samaras’ Berlin visit, Greece had just started to turn the corner. A tourism boom was fueling a modest economic recovery, ending six years of recession. Unemployment remained high, but had started to drop. The government had all but eradicated its budget deficit. And for the first time since early 2010, Athens had managed to sell government bonds to foreign investors.

After the lunchtime meeting, a smiling Merkel told reporters Greece was approaching the “threshold of growth.”

“I know what a difficult time this is for the country, but the first, delicate fruits of success are visible,” she said at a joint press conference with Samaras.

Greece had disappeared from Europe’s front pages, but the political climate remained volatile. Despite the economic improvements, most Greeks were still suffering under the burden of the budget cuts and blamed Samaras’ government.

Against that backdrop, Samaras faced a big hurdle: Greece’s final bailout review. The release of Greece’s remaining bailout money was contingent on a favorable review. Even though Greece had made progress, it needed that money to pay back creditors.

Over the years, Athens had pushed off more difficult reforms, promising its overseers it would address them at the end of its bailout program. Now the end was here and the so-called troika of bailout monitors (the International Monetary Fund, the European Central Bank and the European Commission) demanded Greece follow through.

If he accepted the deep pension cuts and measures to liberalize the labor market demanded by the troika, his centrist government would collapse, Samaras warned Merkel. The Greek parliament was due to elect a new president, a crucial test for the government. Samaras told Merkel he would lose, unless he could steer Greece out of its bailout and claim victory over the hated troika.

Syriza, a coalition of communists and far-left radicals opposed to the bailouts, was waiting in the wings. The party had already won European Parliament elections that spring.

If Europe would disburse the final €7.2 billion from the rescue fund that fall without the pension and labor reforms, Samaras argued, Greece would have enough momentum to start funding itself on the bond market in 2015. Instead of another bailout, Europe could offer Greece an emergency credit line with fewer strictures.

Angie’s choice

Merkel wasn’t convinced. After years of dealing with successive Greek governments, Germany and the IMF had come to distrust Greek promises. The only way to ensure Greek compliance, they were convinced, was to keep Athens on a tight leash.

While Greece had made some progress, they worried that Samaras’s government was slipping back into its bad habit of over-promising and under-delivering.

That summer, Greek tax agency head Haris Theoharis had resigned after receiving anonymous threats. He complained of persistent pressure from Samaras’ government to go easy on the rich. Europe had long complained about Athens’ corrupt system of tax collection, which costs the state billions in lost revenue every year. Theoharis’s position was created under pressure from the troika and the creditors regarded his decision to leave as a major setback.

German officials had come to believe that Greek politicians were largely interchangeable. Merkel’s relationship with Samaras had got off to a rocky start but the two eventually developed a rapport. Merkel also enjoyed friendly relations with Samaras’s predecessor, George Papandreou. Why should Syriza leader Alexis Tsipras be any different?

Berlin decided to let Samaras fend for himself. He pulled forward the parliamentary vote for president, turning into a referendum on his government. His coalition failed to garner enough votes, triggering a general election in January that Syriza won by a wide margin. The months of political grandstanding and fruitless negotiation that followed doused Greece’s recovery, thrusting it back into recession.

German officials argue that it’s not up to Berlin to interfere in the internal politics of other European countries. Samaras agreed to clear guidelines under Greece’s 2012 bailout. Germany, together with the Commission and the IMF, were well within their rights to insist that he meet them, they said. 

To break the impasse in talks with Athens over new bailout terms, Europe has signaled it would grant Syriza much of what it denied Samaras. But Syriza leaders have refused, arguing that they were elected to stand firm against pension cuts and a further weakening of job protections.

“In the fall, the Germans thought they could also deal with Syriza because Syriza would face the same constraints as Samaras,” said Christian Odendahl, chief economist at the London-based Center for European Reform. “They thought, ‘if we get a new government, we can negotiate with them’.”

A strategy of messy compromises

Closer to home, Merkel worried that cutting Athens slack would open her to attacks from the anti-euro Alternative for Germany. The upstart party had scored well in recent state elections and Merkel didn’t want to drive even more voters into their ranks by showing Greece forbearance.

Merkel’s calculus reflected the fundamental flaw in her approach to Greece. Throughout the crisis Merkel has tried to strike a balance between Germany’s economic orthodoxy, which demands tough austerity for wayward economies, and the realpolitik of keeping the eurozone and the wider European Union intact.

Yet the inevitable outcome of the strategy was a messy compromise: Greece would be rescued, but only if it agreed to a rigid bailout regimen.

There’s little dispute that Greece’s economy was in serious disrepair and in need of a radical overhaul. But many economists say the troika’s strategy of forcing Athens to make further spending cuts, just as the country was emerging from a depression, was the wrong medicine. The limbo Greece has faced under Syriza has only made the situation worse.

Odendahl argues that the only long-term solution to the crisis is for the Greeks to take back control of the reform process and for Europe to offer debt relief.

“There could have been a window to help Samaras in the fall without the public noticing,” he said. “Whether it would have changed things, I’m not so sure.”

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