Greece's economic reforms, which led to it abandoning the drachma as its currency in favour of the euro in 2002, made it easier for the country to borrow money.
Greece went on a big, debt-funded spending spree, including paying for high-profile projects such as the 2004 Athens Olympics, which went well over its budget.
The country was hit by the downturn, which meant it had to spend more on benefits and received less in taxes. There were also doubts about the accuracy of its economic statistics.
Greece's economic problems meant lenders started charging higher interest rates to lend it money. Widespread tax evasion also hit the government's coffers.
There have been demonstrations against the government's austerity measures to deal with its debt, such as cuts to public sector pay and pensions, reduced benefits and increased taxes.
In July 2011, Eurozone leaders and the IMF agreed to lend Greece 109bn euros ($155bn, £96.3bn) - a year after it was granted access to a 110bn euro rescue package.
Eurozone ministers were worried that if Greece was to default there would be a risk of contagion to other economies. They hope the package will resolve Greece's debt crisis and shore up the euro.
Greece's economic reforms, which led to it abandoning the drachma as its currency in favour of the euro in 2002, made it easier for the country to borrow money.
Greece went on a big, debt-funded spending spree, including paying for high-profile projects such as the 2004 Athens Olympics, which went well over its budget.
The country was hit by the downturn, which meant it had to spend more on benefits and received less in taxes. There were also doubts about the accuracy of its economic statistics.
Greece's economic problems meant lenders started charging higher interest rates to lend it money. Widespread tax evasion also hit the government's coffers.
There have been demonstrations against the government's austerity measures to deal with its debt, such as cuts to public sector pay and pensions, reduced benefits and increased taxes.
In July 2011, Eurozone leaders and the IMF agreed to lend Greece 109bn euros ($155bn, £96.3bn) - a year after it was granted access to a 110bn euro rescue package.
Eurozone ministers were worried that if Greece was to default there would be a risk of contagion to other economies. They hope the package will resolve Greece's debt crisis and shore up the euro.
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The European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) say they have reached agreement with Greece on reforms to put the nation's troubled economy back on track.
The eurozone has been plunged into renewed turmoil by Greece's decision to hold a referendum on the EU's efforts to bail out its stricken economy.
At stake is the next tranche of bailout money that the government needs to pay its bills.
In October, the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) said they had reached agreement with Greece on reforms to put the nation back on track.
"Once the Eurogroup and the IMF's executive board have approved the conclusions of the fifth review, the next tranche of 8bn euros will become available, most likely, in early November," said the troika of bodies which has been mulling if Athens will get any new loans.
However, the leaders of Germany and France, as well as the IMF, have now said that Athens will not receive its next tranche of emergency aid until Greece decides whether or not to remain in the eurozone.
This is money from the 110bn-euro ($148bn, £95bn) bailout agreed last summer. Eurozone leaders have subsequently agreed a further 109bn-euro package, but this has yet to be fully ratified by member states.
This is money from the 110bn-euro ($148bn; £95bn) bailout agreed last summer. Eurozone leaders have subsequently agreed a more comprehensive bailout package, including losses for banks and a larger bailout fund.
And it comes as Greece announced that the 2011 deficit is projected to be 8.5% of GDP - down from 10.5% in 2010 - but short of the 7.6% target set by the EU and IMF.
The whole point is to prevent what started in Greece spreading to other European economies.
The wider aim of the bailouts is to shore up Greece's economy, calm the financial markets, and stop contagion spreading to other debt-laden European economies.
As part of the latest "three-pronged" agreement to solve the region's huge debt crisis, private banks holding Greek debt have now accepted a loss of 50%.
Why is Greece in trouble?
Why is Greece in trouble?
Greece has been living beyond its means in recent years, and its rising level of debt has placed a huge strain on the country's economy.
Greece has been living beyond its means since even before it joined the euro, and its rising level of debt has placed a huge strain on the country's economy.
The Greek government borrowed heavily and went on something of a spending spree after it adopted the euro.
The Greek government borrowed heavily and went on something of a spending spree after it adopted the euro.
Public spending soared and public sector wages practically doubled in the past decade.
Public spending soared and public sector wages practically doubled in the past decade. It has more than 340bn euros of debt - for a country of 11 million people.
However, as the money flowed out of the government's coffers, tax income was hit because of widespread tax evasion.
However, as the money flowed out of the government's coffers, tax income was hit because of widespread tax evasion.
When the global financial downturn hit, Greece was ill-prepared to cope.
When the global financial downturn hit, Greece was ill-prepared to cope.
It was given 110bn euros of bailout loans to help it get through the crisis - and has now been earmarked to receive another 109bn euros.
It was given 110bn euros of bailout loans in May 2010 to help it get through the crisis - and then in July 2011, it was earmarked to receive another 109bn euros.
But many fear that will not be enough.
But that still was not considered enough. Another summit was called in October in Brussels to solve the crisis once and for all.
Why did Greece need another bail out?
Why did the crisis not end with the Greek bailout?
Greece received its original bailout in May 2010.
The aim of the original Greece bailout was to contain the crisis.
The reason it had to be bailed out was that it had become too expensive for it to borrow money commercially.
That did not happen. Both Portugal and the Irish Republic needed a bailout too because of their debts.
It had debts that needed to be paid and as it couldn't afford to borrow money from financial markets to pay them, it turned to the EU and the IMF.
Then Greece needed a second bailout, worth 109bn euros.
The idea was to give Greece time to sort out its economy so that the cost for it to borrow money commercially would come down.
In July this year, eurozone leaders proposed a plan that would see private lenders to Greece writing off about 20% of the money they originally lent.
But that did not happen. Indeed, the ratings agency S&P recently decided that Greece was the least credit-worthy country it monitors.
But bond yields continued to rise on Spanish and Italian debt - leading to fears that their huge economies will need to be bailed out too.
As a result, Greece has lots of debts that need to be paid, but it cannot afford to borrow commercially and does not have enough money from the first bailout to pay them.
The failure of Franco-Belgian lender Dexia also added to woes - French and German banks are large holders of Greek debt.
Despite the bailouts, many people think Greece will default.
The eurozone rescue fund - the European Financial Stability Facility - was 440bn euros, nowhere near big enough to deal with that scenario.
href="/news/special/business/11/economy_jargon/css/main.css?cachebuster=cb00000001" rel="stylesheet" type="text/css" /> Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms: AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is miniscule. href="/news/business-15060411">Glossary in full
And so, in October, the eurozone agreed to expand the EFSF to 1tn euros and got banks to agree to a 50% "haircut" on their Greek holdings.
They certainly do in the financial markets, which seem to have accepted that Greece is heading for an "orderly default".
But then Greece's Prime Minister George Papandreou shocked European leaders by calling a referendum on the bailout package.
In July, eurozone leaders proposed a plan that would see private lenders to Greece writing off about 20% of the money they originally lent, whereas the latest plan includes a 50% write-off.
That has led the leaders of Germany and France, as well as the IMF, to declare that Athens would not receive its next tranche of emergency aid until the referendum had passed.
What continues to worry the markets, however, is fear of a "disorderly default" and the domino effect that might have within the eurozone.
Major eurozone governments have been criticised for a lack of political leadership, and there have been signs of divisions within the ECB.
The concern in the markets is that the eurozone's political structures do not have the authority to deal with the magnitude of the economic problems.
It is not yet clear if the latest deal will go far enough to reassure investors for long.
Could the crisis spread?
The aim of the last Greece bailout - as with the first bailout - is to contain the crisis.
The bailouts of Portugal and the Irish Republic were designed to tide both countries over until they could borrow commercially again, just as was hoped for Greece.
If that hasn't been possible in Greece, investors may question whether the same solution will work for the other two bail-out recipients.
The Spanish and Italian economies are far bigger than those of Greece, Portugal and the Irish Republic and the European Union would struggle to bail them out if that became necessary.
What would happen if Greece defaulted?
What would happen if Greece defaulted?
Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms: AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is miniscule. Glossary in full
Europe's banks are big holders of Greek debt, with perhaps $50bn-$60bn outstanding. An "orderly" default could mean a substantial part of this debt being rescheduled so that repayments are pushed back decades. A "disorderly" default could mean much of this debt not being repaid - ever.
Europe's banks are big holders of Greek debt, with perhaps $50bn-$60bn outstanding. An "orderly" default could mean a substantial part of this debt being rescheduled so that repayments are pushed back decades. A "disorderly" default could mean much of this debt not being repaid - ever.
Either way, it would be extremely painful for banks and bondholders.
Either way, it would be extremely painful for banks and bondholders.
What's more, Greek banks are exposed to the sovereign debts of their country. They would need new capital, and it is likely some would need nationalising. A crisis of confidence could spark a run on the banks as people withdrew their money, making the problem worse.
What's more, Greek banks are exposed to the sovereign debts of their country. They would need new capital, and it is likely some would need nationalising. A crisis of confidence could spark a run on the banks as people withdrew their money, making the problem worse.
That confidence crisis may spread to overseas banks, which could stop lending until the full extent of a default was known.
A Greek exit from the euro is seen by some as inevitable if the country defaulted. The big question would then be, what about other heavily-indebted nations in the eurozone?
It might be a repeat of the credit crunch that pushed European and the US into recession three years ago.
It might be a repeat of the collapse of Lehman Brothers, which sparked the credit crunch that pushed Europe and the US into recession.
What would it mean for the eurozone?
A Greek exit is seen by some as inevitable if the country defaulted. The big question would then be, what about other heavily-indebted nations?
If Greece can force a "haircut" on its creditors, then why not Portugal or the Republic of Ireland?
The political and economic structures that have bound the 17-nation bloc together could begin to unravel.
German public opinion is already tiring of the government's lead role in bailing out the eurozone in a bid to hold the bloc together.
What does all this mean to the UK?
What does all this mean to the UK?
According to figures from the Bank for International Settlements, UK banks hold a relatively small $3.4bn (£2.1bn) worth of Greek sovereign debt, compared with banks in Germany, which hold $22.6bn, and France, which hold $15bn.
According to figures from the Bank for International Settlements, UK banks hold a relatively small $3.4bn worth of Greek sovereign debt, compared with banks in Germany, which hold $22.6bn, and France, which hold $15bn.
When you add in other forms of Greek debt, such as lending to private banks, those figures rise to $14.6bn for the UK, $34bn for Germany and $56.7bn for France.
When you add in other forms of Greek debt, such as lending to private banks, those figures rise to $14.6bn for the UK, $34bn for Germany and $56.7bn for France.
However, knock-on from Greece's troubles would exacerbate the UK's exposure to Irish debt, which is larger.
However, any knock-on from Greece's troubles would exacerbate the UK's exposure to Irish debt, which is larger.
The UK's direct contribution to any Greek bailout is limited to its participation as an IMF member. But the indirect effect of a Greek default on the UK would be incalculable.
The UK's direct contribution to any Greek bailout is limited to its participation as an IMF member. But the indirect effect of a Greek default on the UK would be incalculable.
