High wire act - and no safety net !

Greek prime minister George Papandreou is a brave man.   His decision to put the safety plan for his country to a referendum may decide the fate of the Euro, the European Union - and the entire western monetary system.

The offer cobbled together under the leadership of German Chancellor, Angela Merkel  is a gift not easily refused.   Fifty percent of Greece's massive debt will be forgiven - at great cost to the banks in a huge array of countries.   In exchange, the citizens of Greece will be required to accept a harsh austerity programme that will see wages and pensions contract - and the tax system will be revamped to collect the taxes that citizens have dodged for years.

A sizeable proportion of the population has been demonstrating in the streets against the conditions set by the IMF and the World bank.   Ancient Greece was the birth place of democracy, hence some will see it fitting that acceptance of this austerity programme will be the subject of a vote by the citizens of that country.

It is hoped that those about to vote have an understanding of what a rejection will set in motion.   The finances of Greece are in such a parlous state that without this reduction in debt and implementation of reforms - default is inevitable - and Greece will become bankrupt.

Some may see this as a better option.  If Greece becomes bankrupt that entire debt - not the fifty percent being forgiven - will be written off, but it will come at a cost.   The country will no longer be able to use the Euro as it's currency - and it may be banished from membership of the EU.   It will have to print it's own currency - and that money will be " non negotiable "  - not accepted anywhere except within the country's borders.   It's exchange rate will plummet - and the expectation is that inflation will sky rocket !

The main advantage is that holidays for tourists will become cheap because of the exchange rate, but the lack of hard currency to buy needed raw materials and finished goods from other countries will see the standard of living fall sharply.   It is unlikely that the present welfare system within Greece could survive - nor could public services like health and education be maintained at their present level.

Greece would probably be thrust back into third world status - but there would be implications for the rest of the world if the vote was for rejection.

One of the main reasons that world bodies have bent over backwards to save Greece and keep it within the EU and the Euro zone is because of the " fear factor ".   A Greek default could possibly tip Italy, Spain and Portugal  over the edge - and bring on not just a repeat of the GFC - but a full scale world depression of the 1929 kind.

Let us hope that the Greek citizens think long and hard before putting pen to ballot paper - and fully understand all the issues involved before they make their choice !