So the grandfather, so the grandson. In 1967, George Papandreou, was prime minister of Greece. He threw in the towel as political and economic instability plunged Greece into chaos. Now it is the turn of his grandson, also George Papandreou, to offer to leave office. In the 1960s the colonels stepped in. Today, the spectre of military rule has been replaced by efforts to form a government of national unity as Greece desperately tries to avoid reverting to being a semi-bankrupt Balkan state closer to the values of the Ottoman Empire than modern Europe.

Of course, all the Greek villa owners in the Tory party and at the BBC want a return to the drachma, charmingly described on the BBC this morning by some Tory peer as a ‘Mickey-mouse’ currency. The British right have always liked the Greeks as long as they know their place and accept their helot status save for the Greek billionaires who keep the Mayfair property market alive and who generously funded the Tory party in the 1990s.

Papandreou the younger has sacrificed himself – for the time being – to force all of Greece’s political class to accept their responsibility. Greek Conservatives have been berating the centre-left reformist Papandreou ever since he won power with a narrow majority two years ago. But New Democracy, as the Greek Tories are called, were in power in the years when Athens lied consistently about the state of its public finances. There seems to be a Greek word for every aspect of this crisis save perhaps, chutzpah. The sheer cheek of Greek Conservatives who were in charge of the nation’s finances until 2009 and who were responsible for the disaster of dishonest reporting to Brussels, protection for their clients, and a failure to raise taxes is breathtaking. The idea that the greedy Greek right should be in charge of the nation at this time of crisis beggars belief.

As at the time of the colonels in 1967, the Greek crisis is a symptom of a far deeper systemic political and economic crisis that is slowly convulsing all the Euro-Atlantic economies. After 1945, the democratic world enjoyed a 30-year era of mixed economy welfare state capitalism. The 1970s were a transition decade with terrible strikes, the IMF having to dictate terms to Britain, and major political changes in France and Germany. The 30-year era that followed was personified by Ronald Reagan and Margaret Thatcher. Economies were liberalised and banks started creating obscure products that flooded the world with money which was easy to borrow. Private and public debt soared. George Osborne famously held up the housing-bubble Irish economy as one for Britain to emulate.

Today, as in the 1970s, the western democracies are again in a transition period. The era of market liberalisation, a reduction of salaries and wages in favour of unearned investment income, combined with easy credit and ever-mounting debt exploded in our faces in 2008. If Labour ministers failed to spot the disaster early enough, Conservative ministers have not produced an adequate response. Exports are shrinking despite the weakest pound in British history. Unemployment and inflation are rising remorselessly to create a new misery index.

Add in David Cameron’s European dilemma based on his promising over years in opposition the three Rs of referendum, repatriation and renegotiation which he cannot deliver on in government and the marginalisation of Britain as a major European player is now plain to see. Some write of a power shift to Asia or rising economies. But China is a creditor nation because the rest of us buy Chinese goods. Brazil, India, Australia and Canada all run trade deficits while the eurozone as a whole is in equilibrium as it exports as much as it imports.

In the past one populist response was protectionism. If we stopped buying Chinese or German goods we would have less debt, ran the argument. Today xenophobic (forgive the Greek) isolationist Tories are screeching that no money should go to the IMF. Yet the idea that if we keep all our money locked up in national piggy banks the crisis will solve itself is fatuous. Whether in Europe or globally we cannot all be exporters without any nation being an importer. That is why the pressure must be on the creditor nations to help support the indebted nations via the EU or the IMF as they try and stabilise their economies. The European Central Bank has cut interest rates which is a step in the right direction. Greece can stay in or quit the euro but the crisis is spreading north and west fast. There is no hiding place for Britain. Using pounds and not euros means little. David Cameron is on the hardest learning curve for a British prime minister in generations. He seems unable to handle the crisis just as Ted Heath and Jim Callaghan were unable to master the transition era crisis of the 1970s. But Labour also has to understand that this crisis of transition from one economic model to the next era requires bold thinking in the national interest not tactical pointscoring in the lobbies of the Commons. What is sure is that the answer will not be found on one country. Politicians are condemned to be internationalists if nations and perhaps democracy are to survive.

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Denis MacShane is MP for Rotherham and a former Europe minister. You can read his other pieces for Progress here

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Photo: francediplomatie