Europe News

How has Greece crisis damaged euro zone's reputation?

Tensions high in Greece

The will-they-won't-they saga over Greek debt has caused havoc across the world's financial markets over its long five-year history but it has also damaged the euro zone's standing as a global economic power.

The through-the-night negotiations, lack of decision-making, and what is sometimes painted as an absence of sympathy for the struggling Greek population, has made the euro zone look like an uncomfortable marriage of economics and politics.

Grexit: Here's what Europe is struggling to avoid

"An unfortunate but predictable feature of European crisis decision-making is that such deals are only ever made at the last minute," the European economics team at Credit Suisse mused in a research note Tuesday.

Eurofudge, -crats and -skeptics

Of course, there is now plenty of optimism that a deal will finally be reached between Greece and its creditors – the troika of the European Central Bank (ECB), International Monetary Fund (IMF) and European Commission – this week. As Bill Blain, strategist at Mint Partners, wrote in a research note Tuesday: "Happy Eurocrats and cheers all round."

Yet the deal, if it comes, has raised fears that it will be just another example of compromise and woolly logic – or "eurofudge" as some in the U.K.'s news media have come to call it. Economists, such as Capital Economics' Jonathan Loynes, are already issuing gloomy prognostications about the agreement being "unlikely to bring the Greek crisis to a decisive end."

Angela Merkel (L) talks with French President Francois Hollande after their bilateral meeting during a Eurozone emergency summit on Greece in Brussels, Belgium, June 22, 2015.
John Thys | Pool | Reuters

Euroskeptics are arguing that Greece would be in a better position without euro zone membership, and the troika-imposed budget cuts which followed its bailout.

To counter that there are the europhiles who insist that the constant quest for a deal shows the euro zone attempting to help out a struggling member, in line with the spirit of the European project.

Were it not for the ECB's emergency funding for Greece's embattled banks, there would have been more serious economic consequences to the flood of cash out of its branches already.

Decision-making logjam

The crisis may also be detracting from other important decision making.

Other, less pressing matters -- like the U.K.'s attempts to win some changes to its relationship with Brussels -- are finding it difficult to get attention.

The travails of Greece too may give some impetus to those who will campaign for a No vote in the U.K.'s planned referendum on its membership of the European Union – both on economic grounds and over what it shows about the lack of transparency in decision-making in Brussels.

"Greece is an extreme example of the euro zone not being an economic success," Ewen Stewart, an economist and consulting director at Global Britain, a euroskeptic group, told CNBC.

"However, the average Briton I think couldn't care less – it seems like an abstract problem."

- By CNBC's Catherine Boyle