ATHENS—Greece's hard-nose negotiating with Europe this week has set up a do-or-die moment for its membership in the euro that has once again pitted Athens against its main benefactor and critic: Germany.
If the history of Greece's crisis can serve as a guide, the latest standoff is likely to be resolved with a last-minute compromise to keep Athens afloat a while longer. The Greek government moved in that direction late Tuesday, saying it would request an extension of its existing aid agreement, a key demand by Germany and other creditors.
Yet reaching a full compromise will be difficult. The two sides have been trading insults all week, further straining an already complicated relationship.
The interplay between Athens and Berlin has defined Europe's five-year effort to resuscitate Greece's economy and keep it in the euro. While there have been tensions between the two sides from the beginning, the acrimony has reached a new peak.
"This Greek government, to be frank, is testing the nerves, testing the patience and testing the goodwill of all its partners in a manner that we haven't experienced before," said Alexander Graf Lambsdorf, the leader of Germany's center-right Free Democrats in the European Parliament, in a radio interview on Wednesday.
While the negotiations focus on a host of important legal, economic and regulatory points, the outcome hinges on a more basic question: How much political capital are German and Greek leaders willing to sacrifice to cut a deal?
Chancellor Angela Merkel has sold the Greek bailouts to skeptical Germans by insisting that the terms would be tough and that Berlin would get its money back.
Any suggestion that she was softening her stance would open Ms. Merkel to attack from anti-euro populists who accuse her of playing down the financial risks of the rescue.
If Berlin fails to keep Greece in the eurozone, Ms. Merkel would be forced to acknowledge that the €240 billion ($ 273 billion) rescue of the country was a failure and that Germany's contribution to the effort was lost.
Even more daunting, a Greek exit would prove that the eurozone isn't inviolable and trigger speculation over the future of other weak links, such as Portugal, Ireland and even Spain, in the currency bloc. The euro crisis could return in full force.
The political calculus in Athens is no easier. The leftist Syriza party that now leads Greece campaigned on a promise to upend the bailout. Any deal that doesn't involve a significant reversal of the austerity measures weighing on the Greek populace would risk a revolt within Syriza's ranks and spark a backlash in the electorate.
So far, the government's confrontational approach to the discussions has bolstered its standing at home. Recent opinion polls put support for the coalition's course above 80%—a record for any Greek government.
Syriza's brash style has had the opposite effect in Germany, however, where numerous politicians and commentators have accused the party's lawmakers of being ungrateful dilettantes.
"I feel sorry for the Greeks," German Finance Minister Wolfgang Schäuble said on Monday. "They have elected a government that's acting pretty irresponsibly."
Greek politicians have responded in kind, suggesting that Germany is trying to bully them.
Greek Prime Minister Alexis Tsipras, speaking in parliament on Tuesday, shot back: "It would be better to feel sorry for the people who walk with their heads bowed."
Greece's media, meanwhile, has continued to caricature Germany's leaders as Nazis bent on tormenting their country.
One controversial cartoon this week portrayed Mr. Schäuble in a Nazi uniform, saying the talks should focus on whether to use Greeks' "ashes for fertilizer."
The cartoon ran in a Syriza party newspaper, sparking outrage in Germany.
Mr. Tsipras sought to distance himself from the caricature on Tuesday, saying in parliament "it was an unfortunate moment."
"Nobody has the right, not even as a joke, to play with the ghosts of the past," he said.
Still the subtext of the cartoon—that Greece is the victim of a German atrocity—is a sentiment that isn't uncommon in Greece. Mr. Tsipras has previously not shied from playing on those emotions. On the day of his swearing-in, for example, he visited the site of a Nazi massacre.
Germany's occupation and subjugation of Greece during World War II left deep wounds. But the roots of Greek resentment over German meddling in their country stretch back even further. In the 19th century, Otto, a Bavarian prince, was installed by Europe's powers as Greece's ruler. His reign, which ended in a coup, sowed a lingering distrust of Germans.
Those resentments aside, Greece needs Germany more than Germany needs Greece.
Today, Greece depends not only on German bailout money but also on its tourists. Germans comprise the largest group of visitors to Greece and tourism is by far the country's largest sector.
Some Greeks worry that if Syriza continues to antagonize Berlin, Germany may simply refuse to keep paying.
Without further support, Greece would be forced to leave the euro. As much as Greeks bristle at the stiff terms of their bailout, they hate the idea of leaving the eurozone even more.
Write to Matthew Karnitschnig at matthew.karnitschnig@wsj.com
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