IN 2007 when my father showed me photos from a European jaunt, which included a stopover in Greece, I was awed by the breathtaking beauty of the Aegean Sea, its shimmering water a deep blue and vivid turquoise.

But today the Aegean's inviting color has come to represent not idyllic good times and pleasure but hardship in Greece. As the place where the European sovereign debt crisis originated, debt-ridden Greece is being watched nervously by the whole world concerned that a Greek default would plunge the global economy into a double-dip recession.

These days we often read about mass rallies in Athens, where thousands of people throng the streets to protest austerity measures aimed at saving their tottering national economy.

It's hard to believe the nation that my father described as peaceful and serene would experience prolonged violence like that.

And it's even harder to match the perception of a Greece of poets, philosophers and mystical beauty with the TV images of demonstrators clashing with riot police. Our hearts go out to the heirs of a rich civilization. But an old Chinese saying quickly comes to mind, telling us there must be something detestable about a person if he is pitiful.

According to journalist Matthew Lynn's book "Bust: Greece, the Euro and the Sovereign Debt Crisis," Greece's fiscal indiscretion is one such detestable aspect. The nation has incurred debts 1.5 times its GDP partly due to its profligacy.

Welfare excesses

Lynn's book details the excesses of the Greek welfare system. The Greek public sector, he says, is bloated and dispenses largesse unequal to its output. For instance, Greek laws consider jobs such as hairdresser and radio technician to be "arduous," so workers in these trades retire early.

The large number of retirees is a fiscal burden on a country with an unemployment rate hovering around 16 percent. It appears that the southern European welfare system could rival the cradle-to-grave Nordic welfare model, at least in some respects. And that's more or less a problem shared by all the PIIGS countries (Portugal, Italy, Ireland, Greece and Spain) that now keep European Union statesmen awake at night.

Many Chinese travelers returning from Europe will tell you, frowning, how laid-back life in the Mediterranean countries is.

Lynn argues that Greece should have moderated its Mediterranean indulgence with a dose of Teutonic discipline. What Lynn criticizes most is that by lending money to Greece, the EU has violated its own explicit bans on bailout of member nations.

Instead, it should now force Greece to leave the eurozone and thus the crisis would have stopped at Greece, he implies. This may be meaningless hindsight now that the crisis has morphed into a continental one.

As European banks have large cross-holdings of Greek bonds, a Greek default would bankrupt many of them and cause Europe-wide political instability. So would an Italian or Spanish default.

The European economy is interconnected in both apparent and many invisible and subtle ways, so that EU has had to rescue Greece.

Greece is small, but its failure would trigger a cascade effect, sending shivers through the business community and further compounding the situation of other PIIGS nations. Italy, the thirst-largest European economy, and Spain, the fourth largest, certainly are too big to fail.

And the only obvious way to save Greece now is to inject funds into its bruised economy. Since Greece's downgrades by credit ratings agencies make it unlikely to obtain low interest loans from capital market, Europe has to intervene to help.

And this is where the EU is most divided. The emergency EU fiscal meeting on Wednesday on debt solution has brought us some good news.

Although most member states agreed to increase the rescue funds known as European Financial Stability Facility (EFSF), not every nation is presumably willing to sacrifice its own taxpayers' money to fill a hole of others' making.

Politicians are rightfully worried about the moral hazards of doing so if Greeks don't drastically cut government spending and endure resulting hardship. As the market keeps pouncing on the euro, euphoria is vaporizing fast.

According to economist Paul Krugman's latest New York Times column published on October 24, titled "The Hole in Europe's Bucket," there is an inherent paradox in the rationale for repaying debts of indebted nations with a common rescue fund. After all, Italy cannot lend money to itself. And France is ambivalent about the proposed fund for its creation would require France to contribute money and jeopardize its own fiscal health.

Euro-skeptics

Currently, many Euro-skeptics are gloating over the euro's woes, and Krugman is not the only person to think the best solution lies in doing away with a single currency. "The euro could have been saved even as late as May 2010. How? By letting Greece go bust," Lynn observes.

Of course, withdrawal from the eurozone is not out of the question for Greece.

Should French and German voters say "enough is enough, let's stop paying the bills for the bankrupt Greeks," Greece has almost no other choice but to leave the monetary union. But such a worst-case scenario is not entirely a bad thing for Greece, which could then print its way out of the troubles with devalued national monies. To be sure, this option is not cost-free, as it's accompanied by horrible inflation.

Divorce is always painful and EU probably won't let that happen. Lynn says that "it wasn't just the Greeks who were burying their heads in the sand. We all were."

His assertion epitomizes the dilemma EU leaders are facing. A club without Greece would mean fewer troubles but it might seriously set back the EU's ambition of expansion.

The EU has been growing for as long as we can remember. It started as the European Coal and Steel Community in 1950 and now has 27 member nations after six major expansions eastward.

The inclusion of former Warsaw Pact countries and adoption of euro in 1999 are milestones marking the apogee of the EU's political and economic might.

For years the EU's political elites have been telling their countrymen that enlarging the EU is in their interests, but their audience increasingly distrusts them.

A single labor market without barriers to cross-border movement of people may be a curse for working-class western Europeans. And EU members would be locked into the rigidities of a single currency. When their economies flounder, they cannot unilaterally devalue currency or cut interest rates to stimulate growth.

"Arrogance and hubris had caught out a generation of political leaders that had pushed too hard and too fast for political and monetary union," says Lynn. It's true that EU politicians are so hell-bent on achieving lofty ideals, like countervailing US hegemony, that they keep enlarging the club to bolster its geopolitical influence. Over time they somehow lost touch with ordinary people.

For Greece, the moment it joined the EU, its destiny was somehow in the hands of others. There is little hope that it could take back control of its own fate, unless it chooses to leave the eurozone. But in that case, Greece would have to think hard about how to grow its economy.

Unlike Iceland, which also suffered a meltdown and whose citizens could retreat to fishing for a livelihood, Greece does not have that option.

Far more populous than Iceland, it cannot expect all its people to return to their rustic roots for self-sufficiency.

So the real problem for Greece may not be the possibility that it might become a failed state or be expelled from the EU, it's how Greece will prevent some German tabloid prophecies from coming true: In desperation Greece sells islands to fill its exchequer.

What would Greeks tell their posterity when the land where Archimedes discovered the secret of buoyancy, where Aristotle observed the stars and cosmos, where Plato debated with anyone he came across, or where Thucydides wrote the Peloponnesian War, no longer had a Greek name?