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) -- The IMF is the key organization in the world's complex currency system. It was founded in the immediate post-World War II period (Bretton Woods) and is an important regulator of the currency system now that the world's major currencies are all fiat (no real asset backing or restraints).

To date, the IMF has played a key role in dealing with the debt issues surrounding the EU's weak sisters. If Greece is allowed to default, the Greek banks will all become insolvent, virtually guaranteeing a long-term depression in that country.

The European banks, which hold $72 billion of Greek debt and $165 billion of loans to Greece's private sector, could muddle through a Greek default, but most would be severely wounded -- with significant consequences for European growth in the near term.

Now, here is the crux of the issue. If Greece is allowed to restructure, what is to prevent Ireland from following suit?

Look at the exposure of the European banks to Ireland:

Germany: $215 billion

France: $82 billion

Great Britain: $237 billion

ECB: $244 billion

If Greece were allowed to default, the European banks could not handle an Irish, Portuguese, or Spanish default. So, now the importance of the IMF should be perfectly clear.

Dominique Strauss-Kahn

has been an important player for the IMF in dealing with all of these debt issues, and, it remains to be seen if his absence will have an impact.

>> Time to End Europe's Hold on IMF Leadership?

My own personal view is that default and a restructuring of the debt of these weak nations is inevitable. The solutions offered, so far, have treated these debt issues as if they were only liquidity problems instead of what they really are -- solvency issues. Eventually, the insolvencies need to be addressed, and with it, the very survival of the EU itself.