Last week the plan to bolster the Euro zone debt crisis was hailed a success. Half of Greece’s debt was to written off, the bailout fund was going to be strengthened and banks were going to recapitalised. The market reaction was initially positive, and markets rose across the world.

Yesterday the lustre of the plan was well and truly removed. European stock markets fell back around 3%, the euro lost value and the economy that cannot afford to fail – Italy – experienced rising bond yields again to over 6%.

MF Global, a US company heavily exposed to European sovereign debt, called in the Administrators.

The fundamentally problems of the Euro zone still exist. The debts carried by too many countries are really hurting. The austerity programmes in place in those countries are squeezing demand out of the domestic economy as people face lowering incomes and higher basic costs. The Euro is a strait jacket that is simply squeezing the economies in the slow lane to death.

Amidst this, the Greek Prime Minister George Papandreou, facing huge domestic turmoil, has offered the acceptance of the revised bailout to be conditional on a referendum of it’s people. Current polling indicates around 60% of Greeks oppose the bailout plan, which would result in further cuts in a country where austerity has already pushed the economy into a very deep and long depression.

For too long the view of the people on the street has been ignored, as both control and chaos from a global level pours down on them. The Greek people are simply fed up of being at the sharp end – the IMF says ‘cuts and privatisation’ and the Greek Government does as it is told.

The consequences of a ‘no’ in the referendum could be catastrophic to the current Euro zone model. Greece would have face the fact that it is insolvent and must default. This would then pile pressure onto the next country in line – Italy. Spain could be close behind.

This scale of default would punch a huge hole in the balance sheets of European banks, and threaten another serious liquidity crisis.

The Greek people are surely seeing that all they are being offered isn’t even jam tomorrow, next week or even next year. They face just more and more pain.

If people feel that it can’t get any worse, a ‘no’ vote is likely, as they feel they have nothing to lose. It would send a signal to European Leaders that the European democratic deficit must come to an end, and their European political-union fantasy is over. Europe needs rebuilding from entirely different foundations.

It would also pose a question for the powers of global finance. People have had enough. What will they do when people say no?

So will Greece be the mouse that roars?