Unable to form a coalition government during May elections, Greece has been forced to hold a second vote on June 17.
In the balance is the future of the Eurozone itself as a "Grexit" looms large.
So much is riding on the outcome that U.S. President Barack Obama and other leaders of the G-8 have conveyed their optimism that Greece will remain in the Eurozone when they convened for a summit on Saturday aimed at keeping Europe's economic woes from stretching around the globe.
"All of us are absolutely committed to making sure that growth and stability and social consolidation are part of an overall package," President Obama said.
But many other principals and economic experts are not as committed and believe a Greek exit would be the best move in the long run.
The question is what impact its departure will have beyond its own ailing borders if Greece renounces its debt and leaves the Eurozone.
What a "Grexit" From the Eurozone Means for GreeceWhat would most likely happen over the next two years is that the Greek economy would no doubt fall more steeply and more swiftly than it currently is.
But after a turbulent period, the Greek economy would grow much more rapidly than it would otherwise, according to Money Morning Global Investing Strategist Martin Hutchinson.
"To recover," Hutchinson says, "Greece needs to leave the euro, devalue its new drachma by about two-thirds, and recover an export and tourism sector that would quickly re-employ its people."
However, if Greece does stop using the euro and issues its own currency its drachmas will at once be significantly less than the euro.
That means banks and companies with foreign debts denominated in euros would be unable to pay their obligations, forcing them into bankruptcy, leading to an even steeper Greek recession.
In fact, the International Monetary Fund (IMF) forecasts the debt ridden Mediterranean nation's GDP would shrivel by more than 10% in the first year. But after a year, maybe two, the picture for Greece would improve and the economy would grow even faster than it would without the devaluation.
The reason, economists say, it that the devalued currency will make imported goods more expensive, forcing Greeks to purchase more domestic products. It will also make the country exports cheaper and more enticing to foreign buyers.
Analysts cite Iceland, which defaulted on its debt and now enjoys a fast growing economy, as an example.
Merrill Lynch also sees a silver lining amid the emerging chaos, noting beaten down European banks may rally following the default if total Armageddon doesn't occur as a result. Silver linings are usually an indication that the tempest won't last forever.
Another Eurozone Debt Crisis in the Making?The nagging concern is the impact that a Greece bankruptcy would have on other nations.
The good news is those risks have actually diminished sharply in the last year and a half since much of the debt has been cleared off private sector ledgers and governments have taken over the arrears.
The EU and the IMF bailed out Greece for the first time in May 2010.
At the time, lenders in other EU nations held $68 billion worth of Greek sovereign debt, according to the Bank for International Settlements. If Greece had defaulted, lenders would have been out some $51 billion at a 25% recovery rate.
But over the next 15 months, those same holdings of Greek bonds dropped by $31 billion. This has dramatically curbed the possibility of a private sector contagion.
The sting would be felt most prominently amid governments. Fitch Ratings reports that public sector claims against Greece will top $450 billion in 2012. Germany's exposure is some tens of billions of dollars--nearly the German government's net borrowing for all of the current year, according to MarketWatch.
But how ever offhandedly some European officials talk of managing a Greek exit, the political and financial costs would embody an essential challenge to the EU and its integrity.
According to Simon Tilford, the chief economist at the Center for European Reform, "Anyone who thinks a Greek departure would be cleansing and not cause systematic contagion is deluding themselves. Already we've seen a sharp increase in spreads and the beginning of capital flight in other struggling euro zone economies, with the risks of a full blown banking crisis in Spain, where Moody's Investor Service has just downgraded 16 banks and four regions."
In short, it could turn into a crisis. In fact, BBC Business News says we can expect the following if Greece leaves the euro:
- Greek defaults
- Greek meltdown
- Bank runs
- Business bankruptcies
- Sovereign debt crisis
- Political backlash
- Market turmoil
Above all, a Greek default would create uncertainty, because the scope and the duration of the contagion in the Eurozone would be largely unpredictable.
And we all know that markets hate uncertainty.
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BBC Business News:
What Could Happen Next if Greece leaves the Euro