Greece is being blown away by the Brussels and Berlin blunderbuss

Banks are at the epicentre of the eurozone crisis, not states. The solution would have been to shut down bad banks and create healthy ones across Europe. But this would have meant German and French taxpayers bearing the costs of restructuring Italian and Spanish banks: an impossibility. Thus, national banking systems have been allowed to drift closer to their own nation states during the past three years: banks have relied on their own states to be rescued, and states have relied on their own banks to borrow. The result has been the fragmentation of eurozone banking, producing enormous divergences in interest rates among member countries. The monetary union is collapsing from within.
Today, ECB president Mario Draghi tried to stop the rot by promising to buy unlimited amounts of short-term public debt from states that accepted austerity programmes. His aim was to compress interest rates and reverse the fragmentation of banking, but it will be a short-term palliative at most. Banks need restructuring, and peripheral competitiveness needs to be restored through an investment programme to raise the productivity of labour. Instead, the EU has opted for the blunderbuss of cuts to labour costs. For the periphery this means high unemployment and low growth; for the eurozone it means a break-up is more likely.

For Greece, where EU policies are most sharply felt, the implications are dreadful. The country will become a poor, aging, dysfunctional and irrelevant corner of Europe.The purchasing power of wage earners fell by 23% in 2010-11, and yet the country continues to slide down the competitiveness tables. Nothing daunted, the troika is now going as far as proposing the return of the six-day week and the actual lengthening of the working day. Labour unrest and anti-social behaviour seem inevitable.
Greece's ruling elite fear a euro exit and so will acquiesce to the troika's demands, hoping to buy time until an overall eurozone settlement is reached. But the balmy days of credit-driven eurozone growth are gone for good. Even if a eurozone collapse is avoided, it will be too late for Greece. To put its economy and society together again, the country must default and exit the monetary union. Profound political change will follow. Some semblance of normality might then return to Syntagma Square.