Referendums are the ultimate expression of democracy – I know that from our own recent experience in Scotland. But, unlike that vote and the one that will face the UK as a whole some time in the next 18 months, the vote to be held in Greece this Sunday is a snap plebiscite which doesn’t allow for much campaigning or time for the repercussions of yes or no to be fully understood.

Sunday’s vote is also far more than a national question. The effects of this referendum may well be profound and long-lasting, not just for the Greek people, but for the whole European continent.

As things stand, the referendum is being framed as a de facto vote on Greece’s membership of the single currency. That is not, nominally, what will be on the ballot paper and it is not what the Greek government proposes, but the rhetoric on all sides suggests that a no vote, rejecting the latest austerity package would in all likelihood presage Greece’s departure from the euro.

Make no mistake, a “Grexit” would have consequences that would potentially be felt by all of us. It would undermine the credibility and integrity of the single currency, even in countries with much stronger economies than Greece, and could also weaken the European Union as a whole.

These are just some of the reasons – over and above the biggest reason of all, which surely must be to avoid plunging the Greek people even deeper into crisis – that a sensible compromise should be found, even at this late stage, to keep Greece in the euro. After all, preventing a Grexit doesn’t just come down to how the people of Greece vote; it comes down to how the international institutions and eurozone members react to Greece’s democratic wishes.

What is needed is an eleventh-hour deal that gives greater priority to the interests of the Greek people, keeps the country in the single currency but also, and crucially, allows it to create the conditions for economic recovery.

The deadline for payment to the IMF may have passed but the IMF has the option of not reporting that default for 30 days. That time and space should be used to the full.

In practical terms, such a deal should mean a reform package which prioritises growth – because that is the only way that Greece can hope to climb out of the pit of near economic collapse and despair that it has fallen into since the start of the global financial crisis and its initial bailout.

To put it bluntly, crude austerity hasn’t worked in the intervening years. The Greek economy has contracted massively, unemployment has risen – youth unemployment is at an eye-watering 60% – and, despite most of the bailout money going to banks, the country’s debt-to-GDP ratio has grown.

And all the while it is the ordinary people of Greece, those who will be voting on Sunday, who have been suffering the effects of austerity on a scale that few people in the rest of Europe can properly understand.

So surely it must be time for an alternative to simply piling austerity on top of austerity. Surely Greece needs the leeway to focus on the kind of reforms that will boost productivity and competitiveness – the approach suggested by Prof Mariana Mazzucato in the Guardian last week. And while Greece can’t simply be allowed to walk away from its obligations to creditors, surely it’s also time for some form of debt relief to be on the table.

If a deal along these lines can be done before Sunday, it would give people something positive to vote yes to. But even if not, and Greece votes no, a package like this should still form the basis of what happens next. Then we would be demonstrating that people and democracy matter.

Any credible recovery package for Greece surely must strike a sensible balance between some form of debt relief – or debt swap arrangement – a programme of investment and reform of the kind Greece’s leaders say they are committed to, and which they should be held to, but which they need economic and political leeway to implement. The interests of the Greek people must count as much as the interests of Greece’s creditors.

The proposals currently tabled look and feel too much like the straightforward imposition of more of the austerity economics which have so palpably failed to solve the country’s problems, and which do not provide that leeway for long-lasting reform.

There is substantial support for such an alternative approach, including from a group of notable economists, led by Nobel laureate Prof Joseph Stiglitz, who have together warned EU leaders against what they call “creating bad history”.

I began by alluding to the UK’s recent experience of referendums, one held in May and the other now looming. One lesson above all that emerges from those campaigns, which I think European leaders would do well to heed in their dealings with Greece, is that ordinary people generally do not react well to what is or can be perceived as threats.

In warning that a no vote on Sunday would probably end Greece’s euro membership, EU leaders are raising the stakes, but may also risk hardening support for the outcome they say they want to avoid.

And “bad history” will indeed be what is created if Greece is effectively forced out of the euro, leading to consequences we do not yet know or understand.