The Greece referendum is generating all sorts of fascinating writing about Life and Diplomacy.

The issues are deliciously complicated. Where to direct most derision? So many fat targets to choose from. Feckless Greek socialists? Mean German technocrats? Clueless top EU bullies? The bloated pretensions of More Europe? Technical blunders in the way the Eurozone was set up? All of the above?

Let’s quickly dispose of the Independent:

It is easy to point the finger of blame in situations as desperate as this one, but it would be wrong to say Greece is solely responsible. As vulnerable to market forces as any country in the world economy, Greece was crippled by the global financial meltdown in 2008. Fiscal mismanagement followed, veering the state toward bankruptcy.

What does it mean to say that any country in the world economy is ‘vulnerable’ to market forces? That makes as much sense as saying that any country is ‘vulnerable’ to the very choices that allow it to breathe and succeed. And did Greece’s ‘fiscal mismanagement’ really only follow the 2008 crisis? Why is this specific crisis affecting Greece and not, say, Poland or Switzerland?

Smart Eurosceptic Iain Martin over at the excellent CapX (subscribe now) explores the evolution of his own thinking and comes down firmly against … “a failure of European leadership, arrogance and cowardice with enormous human costs”:

There was that bailout five years ago which was really a bailout of banks in other countries, such as Germany, where greedy institutions had lent money to Greece. It is estimated that 90% of the funds went to banks to pay banks elsewhere in Europe and only 10% of the money went to the Greek government to organise reform.

The behaviour of the Eurozone and the EU in the face of these developments has been truly appalling. Although Greece has a debt of more 320bn Euros, Merkel talks in laughable clichés about European strength. The most powerful woman in Europe seems incapable of confronting reality or realising that the European project as currently constituted is done for.

Surely there is no point to this grand construct and all that high blown rhetoric about Eurozone unity if it ends up with Greek pensioners and the unemployed begging for money as their country collapses? It is as though they are being taught some sick lesson, by the deluded people who defend the idiotic construct – the Euro – that got the EU into this mess.

Then there’s this subtle and detailed analysis from Zero Hedge, drilling down deep into the technicalities and wondering whether the actual Greferendum result actually makes a scrap of difference:

Greek voters, fearing that banks may not reopen in the event of a No vote (and not knowing whether the Yes vote leads by a safe margin) are highly likely to turn out in droves for Yes.

Varoufakis has already said  that “[i]f [the people] say Yes, we will do whatever it takes to make sure that this agreement is signed exactly as the troika […] is demanding of us”. The head of the Greek negotiating team , Euclid Tsakalotos, has said: “We see the referendum as part of the negotiation process, not in lieu of it”. Monday, therefore, Tsipras is likely to pay a visit to Ms. Merkel, with the results of the referendum at hand.  He will tell Ms. Merkel, all your requests have been granted, now show us the money—save Greece. Now, Ms. Merkel will have no option but to oblige—how on earth can one say no to a nation which has overwhelmingly accepted everything requested of it?

However, Ms. Merkel has repeatedly insisted that there is no deal without the IMF. She always wanted this, as she is afraid that a political decision at EU-level may force Germany to provide financing on concessionary terms to Greece and other potential laggards. But, horror-of-horrors, the IMF in so many words asks for the dreaded haircut. Can you kick out of the Eurozone (assuming, for a moment, this can happen) a country which has just yielded to all your demands? Can you accept a haircut, thus setting a precedent that, whenever a Eurozone country can’t service its debt, Germany will pay up? Ms. Merkel would be cornered, no?

Under this scenario, Tsipras would be likely to get his debt relief. He would be a hero in Greece, as he would have confronted Germany and won. Other laggards, such as the Italians, wouldn’t be too displeased, either: a precedent will have been set, whereby if a Eurozone member screws up, the Germans pay up (would you believe? Mario Draghi happens to be an Italian!).

Let us also give short shrift to the unlikely outcome of a No vote, assuming for a moment that Tsipras were in cahoots with the IMF (and the US) to box in Germany. All that Greece would need is a €1.5bn loan from a friend (the US perhaps?) to make good on the IMF. The IMF could provide the entire €52bn that Greece needs over the medium term. Add that to the €32bn already lent by the IMF (and a bit more to support the banks, if needed) and now the IMF’s exposure to Greece becomes eminently serviceable—or “sustainable”, as they say. Why? Because the IMF has super-senior status, which means it gets repaid before anyone else—including the European bilateral loans of around €53bn, the €142bn lent by the EFSF, the €27bn in bonds held by the ECB and the €39bn in private debt. In other words, Germany would risk seeing its entire exposure to Greece subordinated to that of the IMF, with little leverage in case Greece does not pay up. Talking about being caught between a rock and a hard place…

In other words, Varoufakis may not be widely off the mark, when saying that there is “100% chance of success”—whether Greeks vote yes or no. Tsipras, when saying that Merkel and Gabriel are “uneasy and confused”, may have a point, too.

Fine. But who’s to blame for all this?

Neither Greece’s ailment, nor its cure, is its currency, be it the euro or the drachma, or its pensions—whether too low or too high. Greece’s cancer is the purely domestic cleptocracy which has been sucking the country dry for at least thirty-five years (that’s as far back as I can remember, older people may argue this may have been going on for much longer).

You think I’m exaggerating? Let’s look at a couple of interesting statistics, then. According to the UN comtrade database, supplies of bunker fuel to ships in Greece went from $25m in 2008 to $1.72bn in 2014. Exports of fuel to Turkey went from $204m in 2007 to $3.2bn in 2014. Exports of fuel to FYR of Macedonia in the same timeframe went from $72m to $614m (for comparison purposes, Greece’s GDP in 2014 was $238bn).  Either Greek refineries got very efficient during the crisis, or other refineries in the region got very inefficient. Or it could be that the cleptocrats, hit by the crisis in their other half-way legit businesses, had to supplement their income with other, far more lucrative ventures.

Well, according to the New York Times “Organized crime […]dominates the black market for oil in Greece; perhaps three billion euros (about $3.8 billion) a year of contraband fuel courses through the country. Shipping is Greece’s premier industry, and the price of shipping fuel is set by law at one-third the price of fuel for cars and homes. So traffickers turn shipping fuel into more expensive home and automobile fuel. It is estimated that 20 percent of the gasoline sold in Greece is from the black market. The trafficking not only results in higher prices but also deprives the government of desperately needed revenue”.

According to the FT “George Papandreou, the former socialist premier who resigned in 2011, also claimed he was brought down by oligarchs after a finance ministry campaign to tackle widespread fuel smuggling revealed a Balkanwide scam that cost Greece €3bn a year in lost taxes”.

It’s not as if these smugglers are thousands. They’re a handful of people, whom practically every Greek knows by name. Unlike Escobar, they are not in hiding. They’re feted by the press as “successful businessmen” and are being sat next to prime ministers. There are similar tales to be told in natural gas, energy and practically every sector that has to do with the state.

If that’s not fixed, irrespective of whether the currency of Greece is the euro, the drachma or the rupiah, there can be no end to Greece’s plight.

Is Tsipras likely to fix that? I’ll give you a hint: most Greek oligarchs voiced their support for Tsipras ahead of the general election in January. Before him, they of course supported his predecessor.

Seems reasonable. This is the real bottom-line problem. The IMF and European elite are dealing with a Greek system that (a) simply does not belong where it now is within the Eurozone, and (b) is largely incapable of reforming itself. In such circumstances what policy approach makes any sense at all?

Thus to this superb Spiegel piece exploring how Angela Merkel has grappled with this conundrum. Note the ill-suppressed Germanic horror in this paragraph at the failure of the Greeks even to have a reasonable land registry system – that’s how bad things are!

It has long been clear that Greece is a special case in the context of the euro crisis. It is a country in which neither the taxation system nor the land registry system works, a country that is so deeply in debt that no reasonable economist still believes that it can ever repay what it owes. In addition, parties that habitually plundered the state ran the country for years. Then came Syriza, a movement that, at least in its radical quarters, dreamed of toppling the system…

How might a sensible German leader deal with such a ghastly place?

[T]he struggle between Merkel and the Greek premier is also a battle over the definition of the political. Tsipras has turned the IMF into a symbol of oppression, into a group of technocrats who lack democratic legitimacy and yet are subjugating an entire country. He knew how to stylize resistance to the IMF into a battle over a nation’s self-determination. His aim was to elevate the conversations to the political level.

For Tsipras, politics is a magic wand that can make everything disappear: mountains of debt, reform requirements and the rule that prohibits the European Central Bank (ECB) from keeping countries liquid by printing money. It is hard to say what Syriza actually wants. The party is as much a home to former Maoists as it is to disillusioned social democrats. Some dream of a revolution, while others would be satisfied with debt forgiveness. But one thing is clear: Tsipras’ radicalism lies in his faith in the power of the decision. If he doesn’t accept rules, he demands that they be dissolved. This is the logic of Syriza.

Merkel’s real failure is that she did not decisively stand up to his way of thinking. First, she hid behind the troika, because she didn’t want to be the one to deliver the bitter truths to the Greek government…

Then, when Tsipras’ demands became more and more urgent, she bowed to his logic. She adopted the motto: “Where there’s a will, there’s a way.” In Germany, these words were interpreted as a sign of goodwill — of the desire to keep Greece in the euro zone. But Tsipras interpreted them completely differently: as a challenge to bring matters to a head.

Last Monday, Merkel stood in front of a blue screen in the lobby of the Chancellery and uttered a sentence that typifies her European policy. She was discussing the question of whether a “no” vote by the Greeks to the creditors’ reform program was tantamount to a “no” to the euro. Instead of saying “yes” or “no,” she said: “I will say quite openly: I am divided on this issue.

Back in 2012, Merkel was close to pushing Greece out of the euro, but she balked in the end. She was afraid that it could have a similar effect as the Lehman bankruptcy did in 2008. That was the spark that ignited the global financial crisis.

Since then, the chancellor has gone back and forth. Sometimes she is Numbers-Merkel and sometimes she is Europe-Merkel. Numbers-Merkel sees the Grexit as the most reasonable solution. But Europe-Merkel is concerned about being seen as the EU’s grave-digger should she let Greece fall. There are decent arguments on both sides, but Merkel never made up her mind. She left things open.

The euro crisis opened up a new dimension of power for Merkel. Since 2010, there has been an endless series of crisis summits in Brussels and the German chancellor was always the center of attention. She was the one sitting on the biggest war chest, a fact which granted her far-reaching influence. And Merkel enjoyed her role as the queen of Europe. She didn’t lord it over the others: She wasn’t as loud as Gerhard Schröder and wasn’t as forceful as Helmut Kohl.

Instead, she did what no German chancellor had ever done before. She followed a policy of pedagogical imperialism, with the lesson plan calling for budgetary discipline, labor market reform and privatization. It worked in Spain, Portugal and Ireland, but in Greece, the conditions imposed by creditors were not seen as necessary medicine but as a poison that was destroying society.

Merkel saw what was happening, but she didn’t have the courage to face the consequences. And there were alternatives. She could have offered Greece a safe and supported path out of the euro zone. That is the course of action that Finance Minister Wolfgang Schäuble has supported internally for years. She could also have offered Greece a debt haircut. Had she done so at the right moment, she could at least have prevented the radicalization of Greek politics.

Brilliantly explained. There’s more:

None of these options would have been free of risk. They would have required courage and money, and they would have opened up Merkel to attack. And that is something she didn’t want.

So she hid behind the troika, behind the hated technocrats, thereby accelerating the rise of Syriza. Indeed, Tsipras is, to a certain extent, a product of Merkel’s vacillating leadership style. In the Chancellery, people are expressing relief that Tsipras was unable to drive Europe apart and that nobody is blaming Germany for the current impasse. That may be true, but it is also a rather simplistic view. Success for Merkel is when nobody is pointing their finger at her…

Merkel wants a Europe of nation-states and not a deeply integrated Europe. She was concerned about Juncker running as the lead conservative candidate in 2014 European elections, worried — correctly — that it could result in a reduction of power for European heads of state and government. Furthermore, she doesn’t trust the European Parliament because majorities aren’t as dependable as they are in the Bundestag back home in Berlin.

The chancellor says none of this openly because it would contradict the CDU’s founding principle. She can speak like Kohl, but she breaks with what he stood for. Left behind is a confused EU that doesn’t know what the most powerful woman on the Continent actually wants.

All of which reinforces my own instinct, namely that the Eurozone project and maybe the whole EU integration project have swelled to create such complexity that no-one in a leadership now knows what to do or can expect to command the political support for any sort of sustained approach that makes sense both for themselves and for the tottering edifice as a whole.

Hence (I suspect) the Cameron approach to the UK/EU relationship is coming along nicely: wait for the Eurozone to have a decisive convulsion that compels all EU capitals to take a hard look at what they are all doing and bring in tough-love changes

Treaty change for the Brits? No way! Treaty change for everyone or we all sink? Ghastly. But Unavoidable.