Much has been written on the sovereign Greek debt problem, but very little has had substance and analytical rigour. The dominant view has been that the Greek debt is the creation of a clientelistic political system that has historically resulted in a bloated and inefficient public sector, unable to collect taxes. This is not a serious view.

The Greek debt has domestic and external sources. High defence spending, tax evasion chiefly by the comprador-cum-financial oligarchy and the ship-owning elites, and a large but inefficient public sector constitute the main domestic sources of the Greek debt. Ship-owners navigate their vessels with flags of convenience (so no tax is paid to the Greek state); the comprador financier has his/her company registered in tax havens (so, again, no income for the Greek state); the defence spending is at times becoming as high as four percent of GDP due to an exaggerated threat invoked by the ruling political elites and which is assumedly posed by Turkey. The external sources of debt pertain chiefly to the large current account deficits and recycling of Germany's financial surpluses, phenomena that are merely the result of the asymmetrical movement and structures of capital and labour within the Eurozone. The external origin of the Greek bankruptcy is interesting, although not necessarily more important in the articulation of the overall Greek debt situation.

Historically, and because of its dependent/subaltern position in the global economic and political structures, the Greek economy lacks a robust industrial sector. This has had two significant consequences. First, the state and the ruling party elites used every method possible (clientelistic practices, patrimonialism, corrupt deals etc.) to bloat the public sector via recruitment and favouritism in order to secure re-election. All these phenomena have been employed as strategic options by the ruling classes in order to reproduce and secure their power; they have not been the free choice of Greek civil society and people. Second, Greek industry and companies have always been small and medium size. At times of hardship, such as in the 1950s, Greek Bank Governors could devalue the drachma and re-organise the export capacity of the country. No such alternative existed after 2001, when Greece joined the Eurozone. The country became easily outcompeted within the single currency structure, since they did not enjoy the advantage of currency devaluation to address imbalances. Greece has today mounted some 350 billion euros of sovereign debt. Other peripheral countries have similar, although not identical problems.

The European leaders, especially France and Germany, are trying to solve Europe's debt problem by closing the fiscal gap and introducing a parallel Treaty addressing issues of insolvency by further institutionalising and politicising aspects of EU governance. Britain stays out in the cold, but that is beside the point in this from the perspective I conduct the discussion. By strengthening the institutional ties of the EU between core members, the periphery's problems continue to remain unresolved, because this creates a two-tier EU with further isolation and austerity on the populations of the periphery and a relative, medium-term and rather unsustainable prosperity for the core and the future of the Euro itself. In the event, what was decided in Brussels on December 8-9, 2011 is but a version of Germany's 'variable geometry' strategy, first promulgated in the early 1990s after the country's re-unification.

The problem of the insolvency of the periphery will remain, with the working classes suffering even more without any end in sight, and all this without solving once and for all the problems of the Euro, that is, a single currency without the backing of a single state. Britain, in this respect, may enjoy a similar fate if Frankfurt regained strength under the institutional protection of the core. It is a myth that financial markets work better when unregulated and untaxed. The financial markets work better when they are regulated and taxed and their capital is invested in material production, not in speculation and futures.

At the time of writing, official unemployment in Greece is nearly 1 million, out of a population of 11 million. The countryside is devastated and barter agreements have already appeared among the poor and the petite bourgeoisie. The two-party system built around the parties of New Democracy and PASOK (Pan-Hellenic Socialist Movement) is disintegrating. Growth is -6.5 percent, a contraction that mirrors the conditions of civil war in the 1940s. Britain may face a similar situation after the delirium of the London Olympics next year. But what is the solution for Greece?

Emphatically, there is but one alternative for the embattled country: immediate default on its sovereign debt and exit from the Eurozone. The more Greece stays in the single currency, the more the unemployment rate would increase and the more the growth rate would decrease. Austerity has already taken the forms of a predatory state which, having no money to pay the pensions and salaries of its civil servants, introduces the most exorbitant taxation - all measures imposed by the socalled 'troika' (European Central Bank, International Monetary Fund, European Union) in return for supplying the next 'tranch' of pre-agreed loans. Greece cannot service its debt, let alone pay the principal. Thus, what is happening is straightforward usury.

The two-party system of PASOK and ND which has been governing Greece since 1974 cannot address the problem, simply because it is part of the problem. The fundamental precondition for a successful 'default and exist' strategy is the formation of a new socio-political and democratic coalition whose primary task would be to defeat the ruling bloc, that is, the alliance of comprador-cum-financial oligarchy and the two-party system. If Greece defaults and exits under this condition, it would be in a position to reverse the negative growth rate, nationalise the banks and re-orient them towards productive investment in agriculture and industry, thus addressing the unemployment issue. At the same time, new energy alternatives can be opened, such as solar energy projects, which have the potential of becoming a key export sector for Greece's European partners. Shipping capital, as well as the Church's property and immense wealth, should be taxed. The political and social classes deciding the future of Greece would no longer be corrupt party barons, off-shore operators and bankers, but the productive social classes of the country, the real producer of wealth. It will take some time - a minimum period of five years - for Greece to recover and be in a position to stand on its feet and re-enter the Euro on its own terms, assuming it still exists. But this is a much better prospect than what is happening now, which is destroying the savings and lives of Greek people on the altar of rescuing the banks and the bond-dealers.

(Vassilis Fouskas is a professor of International Relations at Richmond University, London, and founding editor of the Journal of Balkan and Near Eastern Studies (Routledge, quarterly). His forthcoming book, The Fall of the US Empire, co-authored with Bulent Gokay, will be published by Pluto press in March.)

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