If you touch the live wire, a large potential difference will be produced between your body and the wire. As a result, a current will flow through you. This will give you an electric shock which may injure or even kill you. Remember that even when an appliance is switched off, there is still a potential difference in the live wire so you can still get an electric shock.

If the live wire and Earth wire touch, this will create a low resistance path through which the current can flow to the Earth. A very large current may flow through this path and this can cause fires.