Mary Dejevsky: Have the Greeks got it in them to save themselves – and Europe?

Trauma, tragedy, crisis, catastrophe.... Has there always been something about Greece in the Anglo-Saxon mind that explains why we absorbed these theatrical expressions of woe? But there comes a point, even in the most distressing of tales, where things can hardly become any worse. In this year's euro drama, that point may have been reached between Wednesday night and yesterday afternoon.

When the Greek Prime Minister, George Papandreou, announced that there was to be a referendum on the eurozone rescue package, the response of other EU leaders, inside and outside the eurozone, was consternation. The Chancellor, George Osborne, hardly bothered to disguise his frustration in the Commons – and neither he nor David Cameron were even among those who had negotiated the deal. The rage of its two leading architects, Angela Merkel and Nicolas Sarkozy, was palpable, when they appeared together soon afterwards.

The usually unflappable German Chancellor had gone to all the trouble of steering advance approval through a restive German Bundestag – and for what? The French President was seeing a minutely prepared spectacle of pre-election statecraft – "his" G20 summit in Cannes – smashed to smithereens before his very eyes. And then there was an entirely unapologetic Papandreou, talking about democratic mandates and popular consent.

But there was something beneficial, even – it might be said – cathartic, in these reactions. There was no beating about the bush; euphemisms would no longer suffice. Three national leaders had forsaken the careful, and often disingenuous, language of politics to call things by their proper names. At a late-night news conference, Merkel and Sarkozy laid it on the line: Greece had a choice. It could stay in the euro or it could leave.

There is something shocking, but admirable and refreshing, too, about leaders speaking, and behaving, like human beings. Spontaneity is a quality that today's politicians, trained to cope with the 24-hour news cycle, have beaten out of them early on. It surfaces only when the circumstances are so adverse, so extreme, that there is no template of restraint to match.

The paradox is that, when scared enough, yanked from familiar moorings and faced with a quite unforeseen turn of events, elected leaders may not do a bad job. Early reactions to the financial meltdown, in which the then Prime Minister, Gordon Brown, played a big part, showed international politicians at their hands-on, responsible best. The collapse of communism across Europe, which culminated in the largely peaceful break-up of the Soviet Union 20 years ago, threatened dangers that were at least as great, but were successfully averted by wise counsel and an acceptance of the unheralded reality.

When the risks are recognised as genuine, the political games have to stop. This is where Greece and the leaders of the eurozone found themselves yesterday morning, when Papandreou suddenly shortened his timetable for a referendum, his Finance Minister rejected the whole idea, and his cabinet split down the middle, opening the way for what could be the optimum solution: a broad-based government able to convince angry and aggrieved voters that it can do the right thing – and do it well.

Apopulation polarised – between a feather-bedded public sector, and a largely tax-delinquent private sector with only a negligible stake in the state – queers the pitch for any prime minister seeking to unite the country and carry the voters with him. The key, though, has to be competence – a quality whose absence has so distinguished a succession of Greek governments. Unless it is perceived to be equal to the task, no government will inspire the confidence of the people. The political roller-coaster of the past week, with the on, and now off again, referendum, leaves Papandreou looking both maladroit and isolated. Following his refusal to resign yesterday, the Greek, and European, drama would appear to have some distance to run.

In another example of the brutal honesty brought forth by genuine political crises, the French President earlier let slip that he thought it had been a mistake to admit Greece to the eurozone. There is a clue here to some of what must happen next. If Greece decides, after a snap election, or under the aegis of a unity government, to remain in the euro, it will have not only to accept the terms of the prescribed rescue, but to complete the course of induction that it should have passed – but apparently did not – before joining the euro in the first place. It will be on probation, in a way that neither Ireland nor Portugal – which are successfully meeting the terms of their bailouts – was required to be.

Even so, the Greek predicament is not completely without precedent. Parallels have been drawn with the plight of Latvia, which teetered on the edge of bankruptcy in 2008-9. Hugely over-borrowed in euros, the largest Baltic state was the "new" European country worst affected by the international financial crisis. Presented with a choice between drastic austerity and devaluing the currency – which would have ended their ambitions to join the euro – Latvians voted in a broad coalition that promised austerity administered with iron discipline, fairness and competence. This was a government committed to behaving as though Latvia was already in the euro, without the escape route of devaluation.

What followed was a year and a half of severe hardship; the public sector was slashed; wages were cut, or fell, across the board, and there was a sharp rise in unemployment, albeit tempered by a job-creation programme. Within that time, the economy started to grow, joblessness fell, exports were up and – in what was hailed as the supreme vindication – the government was re-elected. Latvia now sells itself as a success, and the ultimate example of how the euro-medicine can work.

Any treatment that awaits Greece will be similar. But in a considerably larger country, without the same level of social cohesion, without the same acute sense of national purpose, without recent memory of times that were much, much worse and without any tradition of fiscal discipline or administrative rigour, even more will depend on the competence of the government and its capacity to win national and international credibility.

Such signal differences may not inspire optimism about the eventual success of the endeavour, assuming that Greece chooses to remain in the euro. But it is just possible that Greeks could be persuaded to come together in a therapeutic programme – if it were ambitious, and inclusive, enough – that would amount to a prescription for national renewal. Therapeutic, incidentally, being another idea that the English-speaking world owes to Greece.

m.dejevsky@independent.co.u