There is a Greek drama unfolding in Cannes, France, today, as members of the G20 — led by the Franco-German alliance they call Merkozy — wrap up another tense week in this latest battle to save the euro zone.

The European Union is an economic and political institution forged over decades, sealed with a treaty in 1993  but only, truly made real in 2002, when most of the current member states dropped their currency in favor of the common  euro. For centuries a breeding ground for war and imperialism, Western Europe had bound itself together in peace and apparent prosperity, with a supranational government all its own to be quartered in Brussels.

Its anthem: “Ode to Joy.”

Things have changed. While most major banks remain multinational (with interests around the world) their errors — some would say crimes — have brought renewed focus on the sovereign state. Today, with Greece on the edge of default, the euro zone nations have a new catchphrase: “Exposure.” As in, how much “exposure” do our banks have to the bad debt held by yours.

It’s enough to make one’s head take an “Exorcist”-style lap around the neck. But here, below, is a simple guide to this latest and most important chapter in the crisis. The results in Greece will likely determine, and certainly predict, the fate of the European Union. This is the least you should know.

Why is Greece in debt?

Like any state (or person, for that matter) it spent more money than it took in. Traditionally, but especially after switching over to the euro, the Greek government paid out huge amounts of cash it simply did not have. To compound this, the retirement age there is low by modern Western standards, and benefits are generous. Public sector employees are well paid.

Sounds good, right?

The problem is that Greece is also infamous for mass tax evasion. That means severely limited revenue. So when the money ran out, Athens turned to European banks for loans. Soon, the government was borrowing billions and those debts, like subprime mortgages in the United States, were often repackaged and sold off around the Continent. Everyone, especially banks in France and Germany, wanted a piece. Now  they have it.

Why does Europe — indeed, the world — care so much about Greece’s debts?

One of the perceived perks when Europe got together on a single currency (Greeks, for instance, gave up the drachma for the euro) was that a strong Europe could prop up an individual state in a time of need. But what’s happened is that Europe itself has become too weak, in the aftermath of the global financial meltdown, to bite the bullet on a country like Greece. A default would shatter otherwise monetarily strong countries like Germany. The Germans, like the Americans, would be left with a host of “too big to fail” banks ready to do just that.

What kind of deal has the EU offered the Greeks?

There have been a few already, and certainly a handful more are in the works, but it boils down to this: European banks will take 50 cents for every dollar owed to them by the Greek government. In exchange, Greece must impose what many have described as a crushing austerity. That means no more early retirement, reduced pay for public workers (the ones who manage to keep their jobs), large-scale cuts to social programs, and a staggered repayment of the reduced debt.

Why did Prime Minister Papandreou originally call for a referendum?

As you might imagine, “austerity” is a dirty word in large parts of Greece. Many people there believe the country is being unfairly routed by reckless spending and subsequent cutbacks by the government.

Papandreou, one assumes, didn’t want to be the guy everyone* blamed for taking the EU deal. So he proposed a vote. A referendum. This seriously worried the rest of Europe, as stock markets cratered on fears that Greek voters would spike the bailout. The PM’s decision was scrapped after foreign leaders (and some influential Greek politicians) put pressure on his governing coalition, which might still break any minute now.

*There have been riots in Athens and across the country. Anti-austerity protesters were further radicalized when three of their own were killed during a clash with police last year.

Why are the Greeks so reluctant to take the bailout?

Pete Morici, a professor at the Smith School of Business at the University of Maryland and former chief economist at the U.S. International Trade Commission, explained it rather well in his latest column:

“[In exchange for] aid from richer EU governments, Greeks must accept draconian austerity measures,” he wrote. “These would further drive up unemployment, and shrink Greece’s economy and tax base at an alarming pace, placing in jeopardy eventual repayment of Athens’ remaining debt. … As currently constituted, a single currency may serve the One Europe designs of France and Germany, but make Greece and the other Mediterranean states nothing more than the victims of a northern conquest.”

Greeks who oppose the deal — and even many who support it only as a means of staying a member of the EU — don’t want to end up like an American post-grad, forever in debt to the banks that provided college loans.

What would happen if Greece defaulted on its foreign debt?

The first thing you would notice is a massive drop in stock markets from the U.S. to Japan, and all across Europe. It is extremely important to understand that what happens in Greece will be seen as the way forward for a number of other countries — Spain, Portugal  and Ireland, to name a few. Some believe Italy could follow suit. Default by the Greeks would likely mean other sovereign states to follow.

Strictly within Greece, it wouldn’t be as bad. Relatively speaking. They would drop the euro and return to the drachma, which would, in turn, be severely devalued. Not great news for Greek tourists planning on a trip abroad anytime soon, but very good news for exports, which would become extremely cheap, like those coming out of China or other, smaller developing markets.

Outside of Greece, it would be a big mess. German banks, and maybe French too, would need massive bailouts. The prospect of those defaults in other debt-ridden countries (see above) could cause a run on the banks. Even more money would leave the market. And when money leaves the market, demand drops. When demand drops, economies crater.

What would happens if Greece accepts the EU deal?

Now that Greek PM George Papandreou has called off the referendum on the deal — a vote would have been very close as polls indicate the Greeks are very closely split on the EU proposal — this is the most likely outcome. Greece would see its debt cut in half and be made to enforce the tough austerity discussed before. Expect riots. Banks around Europe would take a “haircut” but remain, for the moment at least, solvent.

Greece would pay over time, but most of the money right now would come out of a fund sponsored by the stronger state economies from Europe and the IMF. In short, everyone would relax, safe in the knowledge that the global financial system we’ve all come to know and, well — the system we’ve come to know would keep on spinning for at least another day.

(Any other questions? Try me on Twitter: @GregJKrieg. This WILL be on the exam.)