Crisis, what crisis? While reviewing some of the EU’s 2009 economic projections I was startled to note that this year, while more fiscally retentive states such as Germany and the Netherlands will contract by 5 and 4.5 per cent, Greece is on course for a mere 1.3 per cent recession, making the Balkan nation one of Europe’s surprise star performers. No wonder Greece’s near-13 per cent deficit causes so much bile in Frankfurt and queezy bowels in Brussels. Through sheer budgetary incontinence, Greece has effectively deferred its economic crisis.

Alas, however, in the oft-quoted words of economist Herbert Stein, things that can’t last forever - don’t. On the present trajectory, the Greek pension system could run out of money within a year, while the cost of debt service is rising sharply as the gilt mountain is rolled over at higher yield. Perhaps aware of the potential need for a bailout, George Papandreou, the Greek Prime Minister, has been to Brussels to explain himself to fellow European heads of state, while his finance minister, George Papaconstantinou, is doing the rounds to reassure foreign debt holders. By comparison even Italy, long noted for fiscal profligacy, will post a relatively sensible 5.3 per cent deficit this year, over seven percentage points below the Greek level.

Pity George Papandreou, the new Greek Prime Minister. It cannot be easy to be elected to office on a platform of hope and renewal, to discover the previous government has fudged you down a gigantic budgetary hole. Yet that is where he finds himself, and his presentation to fellow leaders at the European Union summit last Thursday offered very few glimmers of light at the end of that particular tunnel. So where will they go from here?

At the centre of his statement in Brussels, repeated in Athens this week, was a commitment to root out ‘corruption, cronyism, and a lack of transparency’. Unsurprisingly that drew few opponents. Speaking against corruption and waste is rather like speaking out for the elimination of cancer: a cause that is unquestionably just, just as it is unquestionably unattainable.

But ‘fighting corruption’ is no more a credible economic policy than ‘curing cancer’ is a credible healthcare policy. For corruption – the use of public office for private gain – is the one item of the Greek budget that can almost never be cut. It is invisible by definition. Perhaps when an official dips their hands into the public coffers, or receives a cash bribe in exchange for awarding a public contract, their behaviour can be monitored and sanctioned, but the kind of corruption that bloats the Greek budget is often more subtle and ambiguous than this. It is the party official who awards a new school or hospital to his home town, the bureaucrat who awards himself an above-inflation pay increase or bonus, or the public sector payroll that is stuffed with friends and family seeking to prove Woody Allen’s quip that ‘ninety per cent of life is just showing up’. In societies where nepotism and clientelism are the norm, it is this kind of subtle, pervasive corruption that permeates every activity of the state, including legitimate public service provision, and one cannot easily separate the two.

Thus while Papandreou deserves praise for promising to “take harsh measures to root [corruption] out”, can such measures deliver the magic savings in the timeframe required? I am sceptical. Graft is not something that can be reduced overnight, but only very gradually, by changing the incentives that make extortion and rent-seeking possible – for example by banning private donations to political parties; deregulating economic activity so companies are less often in violation of arbitrary laws; privatising and subjecting to independent regulatory bodies industries that are currently picked over by vested political interests; and encouraging foreign ownership as a means of transforming the corporate organisational culture. It takes decades, and even when it has been accomplished, one cannot be entirely sure of what has been achieved. Public services may appear more efficiently run, and foreign businesses will speak more favourably of their prospects in the country, but there will be few headline statistics or indicators to let you know that embezzlement and graft are gone. It is a generational struggle, not something that can deliver savings in the four-year envelope required of the Greek government.

So while some of the measures outlined in Athens by Papandreou, such as ending civil servant bonuses, implementing five-year budget cycles, and closing the country’s Byzantine tax loopholes will undoubtedly help to this end, I am not sure they can really reduce the deficit to 3 per cent by 2012. Nor, without impossible precision, will the government succeed at cutting away the cancer of corruption without also slicing at the vital organs of Greek public life. At present, one in four Greeks works for the state: they fill the payrolls of hospitals, schools, even, ironically, employent agencies. And as IMF officials are frequently told while advising governments to cut back expenditure, while everyone can tell you that half of the workforce are merely dead numbers on the books, no-one can tell you which half. So there will be no surgical solution to cutting back the Greek deficit, without loss of qualified staff and the vital public services they provide, as well as deadweights and hangers-on.

Unfortunately, by this point, there really is no alternative. I suspect the only new public sector workers the government will be hiring next year are a great deal of additional riot police.