Two centuries ago, the celebrated English poet Lord Byron published a poem that aptly captured the contrast between ancient Greece and the Greece of his own time. It included these famous lines:

Fair Greece! Sad relic of departed worth!

Immortal, though no more! Though fallen, great!

One wonders what Byron would think of present-day Greece if he were alive today.

For the past five years, Greece has experienced an economic and social catastrophe of unparalleled proportions for an advanced economy in peacetime conditions. The country is now financially bust, and one step closer to an exit from the eurozone.

What went wrong?

How could a nation's economy that was apparently growing faster in the early to mid-2000s than the economy of any other nation in the eurozone become a basket case in only a few years' time and be treated like a colony by Germany?

Greece pressured to cut pensions further

In the course of the rise and fall of nations, internal and external pressures work in tandem - and this is no different in the case of early 21st century Greece.

Still, most of Greece's current problems are of its own creation, although they were truly intensified as a result of its entry into a monetary union in which it was not fit to compete.

Paternalistic political culture

Greece's paternalistic political culture and thoroughly corrupt public institutions have hindered sustainable economic growth and blocked the changes and adjustments that all societies need to make in the contemporary world in order not to remain static and backward-looking.

When it joined the euro, Greece's political elite took advantage of the cheap borrowing costs and engaged in reckless spending, pushing debt and deficits to unsustainable levels.

Greece's economic growth of the last decade was spurred on by bubbles virtually all across the economy. Of course, it was all done with the help of highly irresponsible European leaders and predatory financial institutions.

Indeed, how could anyone lend hundreds of billions of euros to a country that was already posting the highest debt-to-GDP level in all of Europe, had a political regime that was notoriously corrupt, and lacked structures and processes of transparency, democratic accountability, and openness?

When it joined the euro, Greece's political elite took advantage of the cheap borrowing costs and engaged in reckless spending, pushing debt and deficits to unsustainable levels.

 

Hardly surprising, therefore, the Greek debt crisis was the only real fiscal crisis in all of the eurozone as the calamities that befell the other peripheral member states (Ireland, Portugal, Spain, and Cyprus) were caused by their private banking sector.

The crisis in the rest of the eurozone was a typical banking and financial crisis precipitated by the practises of predatory capitalism that the European Union had fully adopted in the course of the last two decades.

The bailout package that was put together for Greece in May 2010 by the so-called "troika" of the European Commission, International Monetary Fund, and European Central Bank was designed primarily in order to rescue Europe's banks and prevent the break-up of the eurozone.

Punishing the Greek people

Not only was the bailout package not meant to rescue the Greek economy, but it's actual intention was to punish the Greek people for bringing the eurozone to the brink of collapse.

Indeed, the policy measures imposed on Greece secured repayment of the loans and thus kept the country from defaulting, but wiped 20 percent off the national output, caused the unemployment rate to soar to stratospheric levels (between 27-26 percent), and created a man-made humanitarian crisis.

All Greek governments up to early 2015 went along willingly with the destruction of the country as they were politically and ideologically committed to the vision of a neoliberal eurozone. 

However, after five years of hardships, the Greek people voted into power the Coalition of the Radical Left (Syriza), which stood against austerity and the bailout terms.

Syriza's rise to power came with a clear mandate to end austerity, secure a debt write-off, and address the humanitarian crisis.

Four months later, Syriza has not moved an inch closer to realising any of the above goals partly because it lacks a clear strategic vision on how to do so, but mainly because of the determination of Greece's lenders not to allow the Syriza-led government to challenge austerity and the terms of the bailout package.

Eurozone's economic dogma

Eurozone has made austerity its official economic dogma and the key actors in it (mainly Germany) want to make sure that grassroot challenges to austerity do not spread like wildfire to the rest of the euro area, although the outcome of the local elections in Spain that were held on May 24, as well as the size of recent street demonstrations in Portugal and Italy, reveal that the Greek "anti-austerity" wave is spreading throughout southern Europe.

Greek Prime Minister Alexis Tsipras at a meeting at the finance ministry in Athens, Greece [REUTERS]

Hence, eurozone leaders have blocked the release of over 7 billion euros ($7.6bn) of bailout funds for Greece, causing a huge liquidity crisis, in an attempt to force the Syriza-led government to accept a humiliating agreement.

But time is running out. Greece is now bust and, as the interior minister announced a few days ago, unable to make payments in June to the IMF.

The above statement reveals the truth about the government's financial position, but also seeks to add a new twist to the standoff between Greece and its creditors.

To be sure, this tactic was reinforced only yesterday with a statement by the Greek finance minister himself, who said that "without an agreement, Greece will not make a payment to the IMF".

Indeed, an agreement needs to be reached by early June, or both Greece and the eurozone are headed for uncharted waters.

Yet the German side appears unwilling to give ground, although Syriza has already made major compromises on German demands for economic reform, including the privatisation of many assets still left under state control, a "compromise" that does not sit well with the very radical elements inside Syriza. 

Indeed, at this point in the game, one wonders if Germany, in particular, would still like to see Greece remain in the euro.

A manageable Grexit

On the other hand, there are many inside Syriza, including influential ministers and MPs, who look forward to an exit from the eurozone. Moreover, they seem to believe, as several of them proclaimed at the party's latest central committee meeting held just this past weekend, that a "Grexit" is quite manageable.

Maybe they are right, or they can turn out to be complete wrong, especially if they fail to provide a vision and chart a strategy for transforming Greece's public institutions, which is key to reviving the economy and securing a sustainable future outside the euro.

Without radically reforming Greece's public institutions and its political culture, an exit from the eurozone might be a drive into the wilderness.

Ironically, the glory of ancient Greece was all due to the magnificence of its public institutions and its exceptional cultural and political features, which included citizen-centred forms of governance and a deep sense of civic virtue.

No doubt, Byron was fully aware of all that when he wrote his famous poem contrasting ancient Greece and the Greece he had observed in his travels.

As a well-read man, he must have been fully aware that specific institutions affect social choices and help promote economic and cultural growth.

If only contemporary Greece had political leaders with Byron's sense of the role of public institutions. Then perhaps an exit from the euro might not seem like a drive into the wilderness.

C J Polychroniou is a research associate and policy fellow at the Levy Economics Institute of Bard College and a contributor to Truthout.org.

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.

Source: Al Jazeera