Greece, the country that has been at the heart of the Eurozone's debt crisis has, for the moment, been taken off the critical list. Some of the pressure on the Eurozone has lifted and many European officials and ministers can breathe a huge sigh of relief.

Greece has been deepest in the mire and it appears to be surviving by the skin of its teeth, relying on bailout loans from other Eurozone members and the International Monetary Fund. The rattled Greek government has passed strict austerity measures in order to qualify for a second bailout package that led to a wave of violent demonstrations and strikes.

Portugal received a €78 bailout in May in return for trying (and failing) to implement austerity measures and working towards a deficit reduction plan. Ireland was given €85bn in bailout cash in November. Greece and many other southern European countries have been living beyond their means since before they joined the Euro.

It's a complex web of disaster. But if we untangle it, there are a few facts that can explain much of what’s happening. Let's use Greece as an example.

Greece and many other southern European countries have been living beyond their means since before they joined the Euro. They have been able to run up huge government debts as well as household mortgage debts during the past 10 years.  After many of these countries adopted the Euro, their public spending soared and the public sector wages bill practically doubled.

Countries do in fact borrow money from each other through bonds and loans that have to be repaid — with interest of course. If a country defaults on its repayments to its investors, which may include many banks across Europe, they would, of course, suffer huge losses in reputation as well as, eventually, monetary penalties.

Now the bust has come and it is very hard for these countries to repay the debts and the high wage levels leave their economies uncompetitive compared with, for example, Germany.

The feared effect of a Greek default, or any other Eurozone country, would be a freezing of the financial system delivering another credit crunch except this time it would be worse because it would not just be banks and individuals lending was being refused to, but entire countries.

The EU commission has just announced that the Eurozone economy as a whole will probably shrink 0.3 percent in 2012 and that we will experience a mild recession in Europe this year. Last November it had forecast growth of 0.5 percent.

Fear has become king across continental Europe. Essentially, all the Euro economies face similar problems: big debts, growing deficits and stalling economies. The anchors in the middle of this are the giant economies of Germany and France, except now commentators have even begun questioning how the latter can survive the crisis. People are asking how long Italy, Spain and Portugal can survive before they are forced into the same situation as Greece. People are asking how long Italy, Spain and Portugal can survive before they are forced into the same situation as Greece.

Modern and heavily developed Western economies are still based on growth and without it, everything goes awry.

Now the developed world is starting to feel the consequences of its over-saturated markets. Companies need to sell goods or services to make profit and grow. They can't do that if the world is already full of TVs, cars, clothes, and everything else. Which it is. And when people can't keep borrowing money and their wages stop going up, they have a tendency to make do with the old TV, car, clothes or home and that spells bad news for the economy. It now seems clear that there are too many companies trying to flog their wares to austerity hit Europeans who don't need them.

Greece has already laid out various austerity measures which include a rise in VAT, a luxury tax on yachts swimming pools and cars. Public sector pay will be cut and many bonuses scrapped. Some 30,000 public sector workers are to be suspended, wage bargaining will be suspended and monthly pensions of above 1,000 Euros cut by 20%.

Despite these austerity measures taken so far, the Greek government still spends more than it receives in taxes.

The knock on effect to you the man in the street will be;

  • Banks delivering less interest on savings, as interest rates will be kept lower for longer;
  • Your pension fund will likely decrease as the stock market’s slump and it is especially bad news if you were planning to retire in the next few months;
  • If a country was to fail and default many companies could go bust overnight because their assets and liabilities end up in different currencies of very different value;
  • Individuals and companies will find it hard to borrow money as lending slows down and those that do qualify for a loan will be charged a higher rate of interest.

It's created a vicious cycle company bottom lines have been hit, leading to job losses and pay freezes. In turn, it's created a squeeze on wages and family finances. As belts are tightened on the High Street and elsewhere, companies suffer more hits to their profits… and around we go again.

Greece is now being told how to run its budget and how to spend its funds. That is the price for avoiding a return to the drachma. Permanent monitors from the EU, the IMF and the ECB will be placed on the ground in Athens to ensure there is no back-sliding. And as these measures have never worked before nothing will change this time.

They have lost the democratic right as their wealth and sovereignty as a country is being dictated by a non-Greek (and a non Italian) elected body. Could this lead to more public unrest across Greece and for that matter across Europe if other countries finances slide the same way as Greece has done?

Will the austerity measures work? Is the EU only buying time to assist with the other hard hit countries? Will we plunge into another deep recession even worse than that of 2008? Who will be next to fall?

Perhaps a trip to the Oracle at Delphi could tell us all.