When Greece joined the EU, some say they cooked the books and made their economy and debts appear better than reality. Regardless they definitely had a considerable amount of debt. After joining the EU the value of the euro quickly rose by 50% and that made their debt much worse than it was. From 2002-2008 the value of the Euro rose from 0.90USD to 1.60USD.
Think of this like most homeowners who owe debt on their house & pay a mortgage. This is similar to someone who currently owes $200k today and makes monthly mortgage payments of $1100/month but a few months later you now owe $400k on your home and your monthly mortgage payments are now $2200/month but your wages have stayed the same. So Greece took our more loans to pay down the debt but just like an individual maxing out their credit cards it quickly spiraled out of control. Before long Greece could barely make the interest payment and then everything fell apart. Greece now owes €323bn (Equal to $356bn) Combine this with the Greek culture as the embodiment of the European lifestyle of 5 hour work days, 6 weeks of vacations a year, retirement at 55, incredible levels of corruption, near impossible regulations and hurdles to start a small business, and the best most sought after jobs being government work with almost all having guaranteed pensions and you have the perfect storm.
So how can Greece we move forward? First start printing Drachma (their old currency) right away. Second default on the debt (basically declare bankruptcy) then negotiate a few essential debts down to just the principal amount loaned. Sorry but no one gets a profit on loans they made to Greece. You will be lucky if you even get 50% of your loan back. Simultaneously lower tax rates, lower regulations, unlock the handcuffs of regulations on businesses and encourage small businesses to start-up. Declare Greece open for business and investment and encourage you’re best and brightest who have already fled your shores for a steady paycheck and opportunities abroad to come home and start a business and a family in Greece. Spread the message “we need you and welcome you back home.”
Unfortunately I do not think any of my recommendations will be taken, and Greece faces even worse times ahead. The government has already agreed to massive austerity (basically cutbacks of services and payments to pensioners) and increased tax rates. This is the opposite of what should be done. The consequences will be dire and more people will flee. All of this is avoidable, and unfortunately the poorest will suffer the most.