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Last month's election of a Greek government led by the radical left-wing Syriza party was supposed to sound the death knell of austerity. Keynesians the world over cheered on Syriza's leaders as they told Germany and Greece's creditors where to stuff their bailout conditions.

That fantasy ended before the tieless Prime Minister Alexis Tsipras and his leather-wearing Finance Minister Yanis Varoufakis marked a month in office. The four-month bailout extension Greece tentatively won this week was a rendezvous with reality. Except for a few vague cosmetic tweaks, Mr. Tsipras agreed to all of the existing bailout conditions.

This about-face amounted to an acknowledgment that austerity is perhaps the least of Greece's problems. Opponents of austerity have simplistically blamed the ongoing European crisis on the tough conditions imposed on bailed-out euro-zone countries led by Greece. This has helped propagate the image of Germany and the trio of institutions overseeing the bailouts – the European Commission, the European Central Bank and the International Monetary Fund – as cruel taskmasters seeking to punish Greece for its fiscal sins.

But it is foolish to suggest that relieving Greece of its obligations to reform its tax-and-spend ways would kickstart the economic growth needed to move beyond the crisis. It would be like telling the orchestra on the Titanic to keep playing while water seeps into the ballroom.

It may well be that Greece, like the Titanic, is a lost cause. Its culture of corruption and tax evasion may be too entrenched, its bureaucracy too tentacular, its economy too inefficient and its oligarchs too selfish and intimidating to expect any government to successfully implement structural reforms. But if Greece has any hope, it lies in actually implementing its bailout conditions.

Not all of them. The IMF's insistence that Syriza follow through on privatizing state enterprises ignores the fact that the likely beneficiaries are the same oligarchs who have stifled competition for decades. Without a truly competitive bidding process and a more open economy, privatization won't put Greece any farther ahead.

Reforms aimed at overhauling taxes, spending and pensions should be the priority. Such reforms are painful for many Greeks, especially the poor. But they are not in themselves the root cause of such suffering. And fixing these programs will eventually make the poor better off.

After all, if the richest Greeks did not systematically evade their taxes, if the underground economy did not amount to a quarter of GDP, if law-abiding employers did not face payroll taxes equal to almost half of their labour costs and if entrepreneurs were not entirely strangled by red tape, the state might actually be able to provide public services and pensions that Greeks were willing to pay for. As it is, cynicism toward government is total.

This Greek tragedy has given capitalism a bad name, one that Mr. Tsipras and Mr. Varoufakis have exploited for political gain. But the fact is that Greece embodies the worst of crony capitalism: A connected few in business and the bureaucracy benefit at the expense of everyone else. Markets only work, however, if the rules are applied fairly and equally to all.

Ironically, it may take a Marxist economics professor to get the job done. If Mr. Varoufakis can temper his and his comrades' leftist populism – and stop perpetuating the fantasy that they can wave a wand and raise wages and pensions without further mortgaging the next generation – the government stands a fighting chance of taking on the oligarchs and winning for a change.

Instead of ending Greek capitalism, Mr. Varoufakis just might save it. And this self-described "erratic Marxist" would be fine with that. He knows that if Greece is forced to leave the euro zone, the consequences would be even worse. For all his bluster, he's no communist cowboy.

As he noted in a 2013 lecture to something called the Subversive Festival in Zagreb: "Who do you think would benefit from [the disintegration of the euro zone]? A progressive left that will rise phoenix-like from the ashes of Europe's public institutions? Or the Golden Dawn Nazis, the assorted neofascists, the xenophobes and the spivs? … I, for one, am not prepared to blow fresh wind into the sails of this postmodern version of the 1930s. If this means that it is we, the suitably erratic Marxists, who must try to save European capitalism from itself, so be it."