It is surprising that Greece is generating shock waves in global financial markets. It accounts for only 2 per cent of European gross domestic product. It has been in default for more than half of its history since 1832, running an average fiscal deficit of 7.8 per cent of gross domestic product since 1988. It presented faulty information about its deficits in 2001 when attempting to secure membership of the European monetary union.

Investors know that the traditional solution to Greece's present problems would be an International Monetary Fund rescue programme. However, the eurozone has opposed Greece turning to the IMF; and it has not yet clearly signalled what alternative help it might provide if Greece were to encounter difficulties rolling over its government debt.

There are historical reasons, too, why markets are highly apprehensive about Greece, and these are linked to concerns about the country's political stability. Greece has had a chequered history in the modern era. There was a civil war after 1945 between monarchists and communists. The military staged a coup in 1967; and voters abolished the monarchy after civilian rule was re-established despite the fact that the king had opposed the coup. Greece elected Socialist governments during the 1980s which ran fiscal deficits even larger than today's.