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The trouble with austerity is that its rationale confuses two distinct motives.

One is practical: to avert bankruptcy, profligate families, football clubs etc must tighten their belts and learn to live within their means.

The other is moral: when called upon to lend money to save the insufferable, spendthrift, over-reachers from financial ruin, one is justified to feel that one's beneficiary must commit to some painful austerity as a rite of passage to the ranks of the responsible citizenry.

In the case of the Greek bail-out, agreed upon last May, the two motives were wilfully confused.

EU and IMF officials, whose job is to administer the huge loans involved, conflate the two in almost every sentence.

At a press conference today, after they finished their probing of Greece's public finances, they announced the approval of a third slice of bail-out funds.

Their condition is that Greece must swallow austerity's bitter medicine again and again both because it is the only way back to health and because it is right that the Greeks learn a lesson the hard way.

<bold>New homeless</bold>

There is a snag, however, that undermines both motives behind the current austerity drive: the prescribed medicine neither cures the disease (which now threatens to engulf the whole of the eurozone) nor punishes the over-reachers.

In short, Greece is currently implementing a savage austerity package that will fail in both its aims. It will fail to arrest the ballooning debt crisis and it will do next to nothing to inflict righteous pain on the culprits.

Meanwhile austerity is doing its job the only way it knows how. Near my university office, close to Athens city centre, I have observed a new strand of homeless person.

Until a few months ago, the homeless were either transient paperless migrants or drug addicts in search of their next score.

Recently, the cardboard boxes strewn on the pavements have begun to shelter locals who, until a few short weeks ago, had homes and low-paid jobs.

I have spoken to some of them. Mostly calm, they stoically accept their life's slide into oblivion, into an endless chain of misery involving no fixed address, no job prospects, no hope.

A rational, albeit cold-hearted, observer may remark that this is the price Greece has to pay for years of living the good life on borrowed money; that massive austerity now, even a ritual sacrifice of innocents, is the only hope for recovery.

Alas, such puritan sentiments constitute a dangerous analytical error.

<bold>Sad truths</bold>

Public opinion, especially in Britain and other countries toying with austerity as a means out of the debt spiral occasioned by the crash of 2008, must be alerted to two sad truths.

First, the "Greek Bail-out" was not intended to bail Greece out. It was a bail-out of German, French and Greek banks; it was the beginning of a textbook case of how not to save a currency union (the eurozone) from collapsing.

Secondly, the very same people who were responsible for Greece's indebtedness, profiting heavily from it in years past, are the ones who are now preaching the austerity sermons and administering the medicine to the innocents who suffer its ill effects.

In short, the combination of throwing good money after bad and imposing austerity in the midst of a ghastly recession is nothing short of negative engineering of the eurozone; of policies that ignore the naked truth that personal virtue and belt tightening is not an antidote to the imbalances on which the eurozone architecture is founded.

Especially now that the Irish Republic, a paragon of fiscal virtue, market deregulation and self-inflicted austerity, has also joined Greece in the dock, the tide has gone out, once and for all, on most arguments in favour of sticking to fiscal austerity as a way out of a structural crisis.

Until the real debate on how to tackle the eurozone's woes begins, austerity will continue to damage our collective, European, future.