My friend, co-author, and colleague, Jason Childs wrote this in a comment/reply on Facebook. I'm stealing it exercising copyright exemptions to reproduce it here:
Greece has been running massive deficits to pay for program spending in excess of their tax take. Their borrowing costs were really, really low after joining the Euro as everybody figured Germany had their back. The Greek economy has seen really low growth due to rigid labour markets, tonnes of regulation, cronyism, and outright corruption. Result - Greece is broke. The deal on offer right now involves (among other things) reductions in pension spending and reforms to the labour market regulations and privatization of poorly government run businesses - intended to make it more likely that the Greek government will be able to make future payments. The leftwing government of Greece has said it will close the budget gap by increasing corporate taxes instead (not great for job creation) and basically told the IMF, ECB, and EU to shut up and give them more money. Merkel (Germany) didn't take kindly to that (the Germans are getting grumpy with sending their tax dollars to Greece). Now the Greek PM has closed banks and stock markets to prevent everyone from trying to take all their savings out in Euro cash and destroying the banks. They vote on the conditions of the last offer from the trioka this weekend I believe. Looks likely that they will reject the deal. If that happens, Greece will default on many of its loans (particularly to the IMF) be unable to make pension payments in Euros (the Greek government basically doesn't have any), and will probably get kicked out (or leave just before getting kicked out) of the Euro.
If they accept the package, there will be lots of spending cuts which will hurt local demand in the short run,but will likely help in the long run. The hard work that they've refused to do so far (reining in corruption and cronyism) will still have to be done and will cause a lot of chaos and upset relatively rich people (who got rich by being cronies - including many government employees).
There's no easy way out for Greece as they refused to do the hard work done by Ireland and others early on in this mess. Yes, they've done some of spending cuts (austerity) but none of the real reforms that are likely to make things better because that would hurt vested interests. But you can't spend money you don't have forever without your creditors getting pissed off.In short --- they're screwed.