Greece's PM Papandreou addresses the audience at the International Trade fair of Thessaloniki in northern Greece
Fitch Ratings warned that even with a 50% haircut, Greece's debt rating would likely remain "junk." REUTERS

The Greek economic crisis is at the heart of the problems of the world economic crisis and for as long as France and Germany continue to ignore the realities that Greece must be allowed default on its debts, the European and world economies will suffer the consequences.

The European financial crisis may look on the face of it different to the American banking crisis of a couple of years ago, but strip away the details - the breakdown of the euro and the dismantling of the Spanish banking system to take just two - what we are witnessing is the next global economic crisis.

Greece announced Wednesday that it would increase public sector job losses, pension cuts and increase taxes on the poorest paid in Greek society all in a bid to show both the IMF and France and Germany that it is working to bring its deficit down and thus receive the $8bn bailout.

The feeling within the U.S. is that this is a more than a European crisis. The global crisis, which has seen slow growth of the U.S., shows the difficulty of climbing out. The U.S. and the world still have to turn to the central banks, in the U.S's case the Federal Reserve for help. The U.S. government wants a new process of quantitative easing started but the Fed is unconvinced that such a process will work.

Has the do something moment come for Europe? Europe must act now either by guaranteeing Greece with France and Germany offering them a full bail out or the country is left to default. Clearly both approaches will be messy but by allowing Greece to default in a restrained way it will allow Greece to build a new economic future for itself.

Bill Blain, co-head of the Special Situations Group at Newedge Group, said to Bloomberg on 14 September 2011 that it would be catastrophic if France and Germany offered Greece a full bailout. Mr Blain said that it would be an 'appalling idea' to bail Greece out and effectively pay off their bills. He has argued that mechanisms must be put in place for Greece to be allowed to build a 'new economic future.'

So where are we in 2011? Are we really worse off than we were in the autumn of 2008? According to ex British Prime Minster Gordon Brown this crisis could send the world economy spiralling in the same way that it did in 2008. On 14 September 2011, Mr Brown said that European banks are 'grossly under-capitalised' and the debt crisis is far more serious than the 2008 meltdown, Bloomberg reported.

In 2008, governments could intervene to sort out the problems of banks, Brown said at the World Economic Forum in the Chinese port city of Dalian a fortnight ago. In 2011, banks have problems, but so too do governments, former British Prime Minster Brown said.

The euro cannot survive in its present form; it's going to have to be reformed dramatically. We are I think at an hour to midnight in the way that we look at this issue, Brown added.

The real worry for the European markets is the losses that are sitting inside the Belgium, French and German banking system, until the ESF fund is put in place there will still be question marks. The issue as well goes back to central banks in Europe and the U.S. How much can central banks really do? As stated, the Federal Reserve in the U.S. is not injecting new money into the economy but the government is heavily reliant on the banks. Simply, there is little to no confidence in the markets.

The most worrying aspect of the crisis is Wednesday's International Monetary Fund's report on the state of the global economy as well as the state of Europe's banks. The reports claims that the long period of low interest rates are simply putting off the reality that Europe must deal with the crisis on its doorstep. The IMF says that by trying to bury their heads in the sand, European leaders are simply sowing the seeds for another crisis.

European banks have taken losses of $200m as the result of the crisis over a number of years BBC's Newsnight reported Wednesday. With three U.S. banks being downgraded alongside seven Italian banks, and one Belgium. What is clear is that the global economic crisis of 2007 and 2008 has not fully been tackled and putting money into the economy was only a short term fix and the economic crisis of 2011 could have far greater consequences for economic and political union in Europe.