Guide: What's going on with Greece?

Watch Sonali's report

World leaders are meeting in Cannes in France to discuss what can be done to solve Europe's money problems. But why is Greece at the centre of it all?

Why is Greece in trouble?

Greece has borrowed loads of money over the last 10 years or so - both from European banks and from other countries' governments.

It used the money to run the country, pay for the 2004 Olympic Games and also for things like big pay rises for people who are paid by the government.

But when you borrow money, you have to pay it back, with what's called 'interest' - meaning you pay back more money than you borrowed to begin with.

Then in 2008, the whole world was hit by a banking crisis where all the world's banks were worried they wouldn't get their money back.

The cost of borrowing from banks went up hugely - and Greece had borrowed and spent so much that it couldn't afford to repay its debts.

Greece isn't alone though - all countries borrow money, and Portugal, Spain, Italy and Ireland are all really badly in debt, too.

Why are other countries so worried?

If nothing is done, Greece could go bankrupt, meaning it completely runs out of money and cancels all its debts.

This could cause huge problems for all the countries and banks in Europe, because they will lose all the money they lent to Greece.

Britain's affected too, even though it doesn't use the euro.

Watch business reporter Steph McGovern explain more to Sonali

Because European countries buy so much of our stuff, what happens to those countries will affect Britain too.

What's being done about it?

Earlier this year, other countries in Europe, led by France and Germany, clubbed together to try to help Greece out.

They decided to lend it more money - hundreds of billions of euros - but things are so bad that even that amount doesn't seem to be enough.

Some of the ways Greece has to save money

  • The government will spend less on schools and hospitals
  • Almost everything will cost more, from petrol to drinks and food
  • The public will pay more tax on what they earn
  • People paid by the government will be paid much less, and many thousands will lose their jobs

In October, Europe's leaders met to come up with a way of fixing the problem once and for all.

They decided that the banks that had lent money to Greece should agree to cut the amount the country owed them by half - and that European governments would give Greece another 100 billion euros early in 2012.

But all of this comes with strict conditions - that Greece must stop spending so much money.

People in Greece aren't happy with the conditions and have been protesting on the streets against the government's plans to raise taxes and cut spending.

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