Last week, financial bureaucrats in Brussels and Washington let out a sigh of relief. Not only did the Papandreou government survive the first three months of the EU-IMF rescue package, earning it the next €9 billion tranche of its €110 bailout package, but the government actually managed to surpass its creditors’ expectations.

According to an EU-IMF statement, “the programme has made a strong start.” The institutions are showering the centre-left government with praise for its “vigorous implementation” of reform measures and its successful spending cuts ahead of schedule.

But what officials are failing to mention is the other side of the story. In an attempt to appease investors, the EU and IMF are obscuring an unfolding human tragedy. If we do not change course quickly, we may condemn millions of poor Greeks to years, if not decades, of unnecessary suffering.

Contracting by 1.5 percent in the second quarter, the Greek recession is turning out to be worse than forecast. Already, 17 percent of businesses in the Athens region have been forced to shut down. Unemployment stands at 12 percent, up from 7.7 percent in 2009, and is likely to soar to 13.5 percent in 2011.

As usual, young people are bearing the brunt of economic malaise and reform. With youth unemployment at 32.5 percent, Greece’s youth is understandably anxious. And with only one set of reforms down and 69 more to go, social unrest is likely to be exacerbated in coming months.

At the same time, while a contraction of demand would normally cause deflation, consumption tax increases – most importantly on petrol – have actually pushed inflation to a 13-year high. As a result, the Greeks find themselves stuck between a rock and a hard place, with prices of basic commodities going up while wages, employment opportunities, pensions and social security provisions are all going down.

Even before the crisis, nearly a third of the country’s population of 11 million – and one in five children – lived below or close to the poverty line, surviving on less than 470 euros per month. A survey by Kapa Research and the London School of Economics concluded that “steadily, a ‘third world’ is being created inside Greece.”

Aggravated by draconian cuts in public spending, anxiety is beginning to permeate Greek society. 60 percent of Greeks now fear that they may wake up on the street tomorrow, with 50 percent believing this may be due to factors entirely beyond their control.

For many, the light at the end of the tunnel is an oncoming train. Suicide rates have nearly tripled this year. The amount of calls received by the country’s helpline for people considering suicide has jumped up from an average of 10 per day in 2009 to 25 per day in 2010.

Surely the Greek government needs to deal with its debt problem, but if we continue down the present path of fiscal fetishism outlined by the EU and IMF, the costs of financial irresponsibility will fall disproportionately onto the shoulders of those who had nothing to do with it in the first place.

By and large – even though we recognized that subprime borrowers in the United States took on debts they would never be able to repay – we did not blame African American values for the predatory lending of greedy bankers. Similarly, we should not fall into the trap of blaming Mediterranean values for the excessive lending of German and French banks, who greedily bought up Greek bonds despite the obvious risks involved.

The people who are now made to foot the bill for the irresponsible risk-taking of German and French banks are the 3.5 million Greeks who struggle to get by on less than 470 euros per month. To blame these people for profligacy and to demand them to tighten their belts ever further, is not only a sign of bad taste but also an indication of very poor judgment.

In truth, Greece is now on its way to become the Argentina of the Eurozone – a depressed economy at the margins of the single market, with a vast segment of its population mired in poverty and a generation’s dreams ruined for life. The first signs of a humanitarian tragedy are beginning to emerge. How long will it take us to change course?