You couldn’t have had a clearer demonstration of what democracy now counts for in Europe than this week’s immolation of Greece. In January, after five years of grinding austerity imposed by the troika of creditors had shrunk its economy by a quarter and pushed millions into poverty, Greeks rebelled and elected an anti-austerity government.

Following months of fruitless negotiations, the country voted last week to reject the latest cuts, tax rises and privatisations demanded to deal with the disastrous impact of the first phase of austerity. The response of the eurozone’s masters was immediately to ratchet up the pain still further. For the “breach of trust” of daring to put the terms to its people, Athens was to be punished. So on Monday – threatened with expulsion from the eurozone and economic collapse courtesy of the European Central Bank’s cash blockade – the Greek prime minister, Alexis Tsipras, bent the knee.

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In exchange for what is called a bailout, but is in reality the imposition of new debts to pay existing creditors, the Greeks must hand over €50bn (£35bn) of public assets to an “independent” privatisation fund. On top of that, they have to inject more austerity into a shrinking economy and reverse any legislation deemed unsuitable by the eurozone’s overlords – in other words, the opposite of everything Tsipras and his Syriza party were elected to do.

That’s why European officials were so keen to let it be known that Tsipras had been “crucified” and “mentally waterboarded”. Greece would be turned into an economic “protectorate”, one purred, where all key decisions would be taken by foreign governments and unelected EU bureaucrats. No wonder Greek leaders declared that they had been subjected to a coup, while the ex-finance minister Yanis Varoufakis compared the “deal” to the Versailles treaty. This is the diktat of a bankers’ ramp that can barely tolerate even a facade of democracy.

That’s been a familiar pattern in the developing world for decades, in the guise of IMF and World Bank structural adjustment programmes. But the eurozone has now given it permanent institutional form. The idea that this crisis has simply pitted one democratic mandate – that of Greece – against the hard-pressed taxpayers of 18 other eurozone members is nonsense.

Not only have the loans that bailed out French and German lenders, rather than Greece, been highly profitable. But the real fear of eurozone governments is that if Greece’s rebellion against austerity is rewarded, other European electorates will want to go the same way. Which is why Syriza must not only be defeated, but utterly crushed.

That this is about politics more than economics should now be obvious. It’s not just that the austerity imposed on Greece has delivered a 1930s-style depression, or that Ukraine was recently bailed out with generous debt write-offs but without any crucifixions or waterboarding. One part of the troika, the IMF – dominated by a US anxious to keep Greece in the Atlanticist camp – has now revealed it is well aware Greece’s debts will never be repaid without massive relief and that this week’s deal could swell them to more than 200% of GDP. In other words, it won’t work. But pre-Keynesian balanced-budget economics has the eurozone’s rulers in its grip, as they seek to overcome the crisis by restoring corporate profitability.

It was Syriza’s commitment to opposing austerity while remaining in the euro at all costs that led to capitulation. What helped win the election became a fatal handicap in office, as Tsipras resisted pressure even to make contingency plans for Grexit. That would have strengthened his negotiating hand, as well as giving Greece the option of escaping indefinite economic depression.

The short-term costs of exit would certainly be harsh. But, combined with measures to take control of the economy and tax the oligarchs, it at least offers the chance of longer-term recovery. That’s now the view of many inside Syriza and beyond, including those who voted against the eurozone diktat in the Greek parliament yesterday, and support is likely to grow as economic asphyxiation resumes. Otherwise, the far right will be the main beneficiary.

Either way, the fallout from what has happened this week is likely to be momentous. Even if the latest deal is softened and holds for a few months – under the formal aegis of a wounded Syriza-led government, or not – it won’t last. Sooner or later Greece will be forced out of the euro, or leave of its own accord. The only question is who will control that process.

Once that happens, and euro membership is seen to be reversible, the future of the wider eurozone will be thrown into question. A half-baked currency union, without fiscal transfers or democratic structures, cannot last. A eurozone nakedly dominated by one state, Germany, enforcing destructive austerity on its vassals with such brutality, can have no enduring legitimacy.

What kind of a union treats one of its members like a recalcitrant colony and dismisses its democracy as an affront?

While it has benefited German capital, 16 years of the euro have delivered flat wages to German workers and stagnant growth and productivity to countries such as Italy. This week has made a mockery of monetary union as a path to a united democratic Europe and opened the way for the eurozone’s breakup.

Once that process begins, expect the future of the European Union itself, with the eurozone at its heart, to be put in question. What kind of a union of partners treats one of its members like a recalcitrant colony, destroys its economy if it steps out of line, and dismisses its democracy as an impudent affront? In fact it’s one that has always ducked democratic accountability, embedded deregulation and privatisation in treaties, and preferred to fix policy – including the race-to-the-bottom Transatlantic Trade Investment Partnership – with corporate interests in secret.

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It’s hardly surprising that hostility to the EU, which shows no signs of being open to deep-seated reform, is growing across the continent. Or that many progressive people in Britain, previously attracted to what seemed its cooperative internationalism, are moving towards voting no in the planned in-out referendum in the face of its brutal authoritarianism towards Greece. In their zeal to discipline the eurozone, the continent’s elites are killing their European project.