By Noah Barkin
BERLIN (Reuters) - Germany's 7-1 drubbing of Brazil in the soccer World Cup last summer was uncomfortable to watch, even for jubilant Germans whose cheers turned to sheepish smiles as the goals piled up.
The bailout extension deal that Germany and its European partners clinched with Greece on Friday after weeks of public jousting between the countries had a similar feel.
In the end, it looked like a total triumph for the Germans, who forced Alexis Tsipras, Greece's new leftist prime minister, to swallow virtually all of their demands.
But it was not a feel-good victory, nor one that bodes well for a single currency bloc struggling to emerge from a half-decade of financial and economic crisis, and increasingly threatened by populist political forces on the right and left.
Tsipras and his Finance Minister Yanis Varoufakis, a charismatic economist with a passion for Karl Marx and flair for rhetoric, clearly overplayed their hands.
Their pledge to roll back German-ordered austerity and keep Greece in the euro always looked unrealistic.
One of those promises would have to go, and with a solid majority of Greeks keen to stay in the currency bloc, it should have been clear which would crumble.
Still, it is hard to avoid the sense that Germany also may have gone too far.
Finance Minister Wolfgang Schaeuble's public rejection of a Greek proposal surprised euro zone partners as well as cabinet colleagues in Berlin, including Chancellor Angela Merkel.
It was not Schaeuble's objections to the draft which were problematic, but his decision to go public at such a sensitive point rather than do so behind closed doors.
That meant the Greeks could not climb down without a near-total loss of face. On Friday, once they had buckled, Schaeuble rubbed it in again, saying: "The Greeks will certainly have a difficult time explaining this deal to their voters."
Tsipras tried to spin the deal as a victory, describing it to Greeks in an address to the nation as a step towards leaving behind austerity, the bailouts and the dreaded troika -- the European and IMF officials who monitor Greek reform progress.
"We won a battle, not the war," Tsipras said.
BEATEN AND BEWILDERED
In truth, like the Brazilian soccer team last summer, the Greeks emerged beaten and bewildered from their tussle with Germany.
Marcel Fratzscher, a leading German economist, said this was neither a good outcome for Greece nor for Germany and Europe. In soccer terms, a 3-1 victory would have been better for all involved.
"The Greek government will only be able to tackle difficult reforms in the coming months if it saves face and its credibility," wrote Fratzscher in German weekly Die Zeit.
Syriza's far-left radical wing has so far been silent on the concessions Tsipras swallowed to reach a deal. But that could change, threatening the cohesion of an unwieldy coalition government.
"What will be crucial in the next four months is whether Greeks develop the sense that it's their government that has the upper hand in policymaking or whether it is the foreign institutions that are ordering it around," said Costas Panagopoulos, of Greek polling group Alco.
Tsipras was right that the deal was just one of the many battles his government must fight in the months ahead.
On Monday, it must submit a list of planned reforms, which require approval by the troika before national parliaments can vote on new loans to Athens.
At the end of April, the troika will rule on whether the government has implemented the reforms and whether Athens receives the last of its aid tranche.
In June, the extended second bailout programme expires, giving Greece and Tsipras a chance to go it alone. But with billions of euros in bond repayments due this summer, a third bailout programme, with new budget and reform conditions, cannot be ruled out.
Deeply strained ties between Athens and Berlin will not make these negotiations easy.
"GREXIDENT"
According to some officials in Brussels, the relationship between Schaeuble and Varoufakis may be beyond repair after the Greek minister's suggestion at a joint news conference this month that German austerity policies were leading to the rise of Nazis in Greece.
Officials in Berlin deny Schaeuble was bothered by those comments or by a Nazi caricature of him that appeared in a newspaper close to the ruling Syriza party.
But they acknowledge a complete breakdown in trust.
"It will be difficult to build this up again," said one official, who declined to be named because of the sensitivity of the issue.
"Schaeuble believes if a country doesn't respect the rules we are better off without them," the official added. "We can't have a situation where we are constantly having to spend our time on a country that makes up 2 percent of the bloc's GDP."
Schaeuble's stance was praised in conservative German media.
"Finally someone has said no to the bankrupt Greeks," read a headline in Germany's top-selling Bild newspaper on Friday. "Germany says thank you, Wolfgang Schaeuble!"
But it is likely to add to fears of what sociologist Ulrich Beck has called a "German Europe", in which a reluctant Berlin wields an economic rule book to assert its influence over its partners.
Schaeuble's handling of the crisis has also raised questions, notably among Social Democrats in the ruling coalition, about how much Merkel, who has been devoting huge amounts of her time to the Ukraine crisis, can afford to delegate an issue as sensitive as Greece.
Their fear is that more clashes could lead to what some are calling a "Grexident" -- accidental Greek exit from the euro sparked by inflammatory rhetoric that shakes financial markets and triggers a run on Greek banks.
"We may have come very close to this scenario last week," the German official said.
(Additional reporting by Deepa Babington; Writing by Noah Barkin; Editing by Giles Elgood)
