Greek Prime Minister George Papandreou's call for his countrymen to vote on a European debt-relief plan has raised the possibility that Greece could become the first country to abandon Europe's common euro currency.
The language of a referendum question has not yet been set. But Greek and European officials already are saying the vote's significance can be simplified to a question of whether Greece wants to remain as one of the 17 countries that use the euro.
Surveys in Greece show that voters want to stay in the eurozone and keep the euro as its currency. Yet there is widespread anger at the continent-wide debt relief plan that demands that Greeks carry out austerity measures over the next several years in exchange for absolving the government of $140 billion of its debt.
Quitting the eurozone could have widespread ramifications for both Greece and other European countries. It could lead to a run on Greek banks, a financially calamitous default on much or all of the government's nearly $500 billion in debts, and a return to use of a devalued drachma currency. International financial markets could stop buying the country's bonds, leaving it short of cash.
Banks in other countries could face huge immediate losses if Greece fails to repay its obligations to them. That, in turn, could lead to new international economic turmoil that Europe's leaders thought they had resolved with last week's agreement, and possibly spawn another worldwide recession.
The common euro currency took effect in 1999, but Greece has been one of its weakest financial links. The government has run up huge deficits that have forced its European neighbors and the International Monetary Fund to approve two Greek bailouts in the last year and a half.
Advocates of an exit from the eurozone and a return to the drachma say it would give Greece more control of its affairs. One Greek economist, Stergios Skaperdas, now a U.S. university professor, said that staying in the eurozone will mean that "all important fiscal decisions will be made outside the country." He said the country is now subject to "private discussions" between German Chancellor Angela Merkel and French President Nicolas Sarkozy, the leaders of Europe's two strongest economies.
Skaperdas said that an involuntary default on the country's debt would prove more effective over time than a partial cut in its debt, like that called for in last week's agreement. He said the country could immediately stop paying interest on its loans, deal with short-term sacrifices and then control its destiny.
Some information for this report was provided by AP and AFP.