New Delhi: John Maynard Keynes, the British economist who advanced the notion of large counter-cyclical public spending by the running of budget deficits as an antidote to economic recessions, is frequently associated with a well-known and rather meretricious axiom. ‘If you owe your bank manager a thousand pounds, you are at his mercy,’ Lord Keynes said in 1945. ‘If you owe him a million pounds, he is at your mercy.’ The new Left-of-Centre Greek government of Alexis Tsipras has taken the maxim to heart.

Since the Greek government led by Syriza assumed office weeks ago, it has played a high-stake game of chicken with the European Central Bank (ECB) on its debt obligations and promises. Greece wants to “renegotiate” (aka repudiate) its debt load of Euro 240 billion that the previous Greek parliament had taken as a bailout for its bankrupted economy. The deal was that Greece will undertake deep structural economic reforms and repay the bailout. Four years on the new government says it cannot repay the debt and has no intention to pursue the reform programme. The Eurozone led by Germany can lump it.

In 2001, Greece joined the Eurozone and adopted the Euro in place of the Drachma. In one fell sweep, the rather modest Mediterranean nation joined the big league of Germany and France. What followed was a honeymoon of strong currency and cheap credit. The Greek government and the people started living the high life on borrowed money.

When the bills came due for payment, there was no money. It now transpires that successive Greek governments had been plain lying about the true state of finances and a lot of cheap credit was wasted on white elephant schemes or stolen. As the markets demanded answers, the Greek government confessed to cooking national accounts in the late 1990s fraudulently to gain admission to the Euro. The markets and most of all Germany were incensed by the chicanery.

Over time, things got progressively worse and a series of bailouts were organized. In 2010, the ECB agreed to provide an emergency loan of Euro 110 billion through to 2013. As in any loan, one of the conditions was an austerity programme including a balanced budget, which is simply living within one’s means.

The promised balancing has not happened. Instead, more good money has been thrown to avert Greece’s never-ending fiscal crisis. For many within the European Union (EU), the reforms have been half-hearted; for the Greek people, it is heartless. After much mudslinging on every side, the Greek tragedy continues.

Enter the Syriza in January 2015 when it won the parliamentary election on a plank of rolling back austerity measures and returning to public spending (money the government doesn’t have) to ease the misery of the poor. This means reneging on promises and negotiating a “haircut” on loans. The argument is that Greece is structurally bankrupt and needs a fresh start.

Like any desperate borrower who has nothing more to lose, Greece has been threatening the worst (exit from the EU, playing ball with Russia) and invoking an understanding for its predicament. The Greek finance minister, Yanis Varoufakis, spelled out Greece’s refusal in The New York Times to be treated as a “debt colony” subjected to “the greatest austerity for the most depressed economy”, adding: “The lines that we have presented as red will not be crossed.”

So what is the way forward? Either of two things has to happen. Germany has to tolerate Greece reneging on balancing the budget in a set time. This will severely degrade its authority within the EU and lead other peripheral nations to demand similar concessions now and in future. Else, it can call Greece’s bluff and expel it from the European Union. Nobody knows the full economic and political consequences of such exit. There are no easy options here. Greece has put the EU in a bind. EU seems like the classic “Roach Motel” where it is easy to check-in but almost impossible to check-out.

Eventually, the Eurozone will have to cease to exist in the present form. The beginning of the end has commenced. The question is not an “if” but “when”. It was always an artificial construct and artificial things take too much energy and effort to keep natural and alive.

Postscript: One out-of the-box solution is to expel Germany and France from the Eurozone. The smaller countries would have a more even playing field!

Editor’s Note: Ramtanu Maitra of the 21st Century Science and Technology, Washington D.C., has responded to the commentary, Brand India (20 February 2015), with the following observation:

Prime Minister Narendra Modi has to resolve the problems he is facing. It will be lame for him to say he failed because the situation was worse than he thought. I have my thoughts about why I do not see a future turnaround. By turnaround I mean assured long-term development and not just rising growth figures.

Modi has put the cart before the horse. When you require $1 trillion for infrastructure which is key for Make in India, you have to understand that only a pittance will come from abroad. Developing economic ties with China, Japan, the US and Russia through infrastructure projects is part of Modi’s well-conceived foreign policy. But it will not secure mega finances for transforming India’s ailing infrastructure. Directly tied to this is the lifting of millions from poverty and giving their children a future.

To achieve this, money must be generated. The only way it can be generated is by putting in place a credit system which will enable investors to take a stake in proposed projects. This is how Alexander Hamilton built America’s infrastructure. The socialists didn’t have a clue what this was about.

On land reforms, Modi’s approach is stilted as well. We have to procure thousands of acres of land. Much of it will come from small and medium farmers. In the United States, only 3.5 percent of the workforce is allied to agriculture. If 1000 acres is needed, the farmer with likely 5000 acres will give it out for a price. He is relatively wealthy and has other skills. Procuring 1000 acres in India would impact 1000 families of marginal famers adding up to about 5000 people. These small farmers have no savings, no skills and little formal education. You can give them any amount of cash and that will run out. They will be either on the streets or become organized criminals as we saw develop in NOIDA.

The correct sequence to procure land for infrastructure, special economic zones, etc, is to get masses of agricultural workers (who constitute 58 percent of the workforce) out of their land and into other work. This means providing them education, skill-sets and jobs. Land procurement, thereafter, will be no problem since most farmers’ children would shun physically-demanding and low-profit agricultural work. In Punjab, children have long left their land for other pursuits. Bhaiyyas are brought in trainloads to weed, plough, seed and harvest the fertile lands. The horse must be put before the cart to go places.