From what I have read what happened is this: Germany (and France) already had export fueled growth, they made exports cheap; There was flush cash, so the now ailing economies imported goods, services and infrastructure and used debt to pay for this. Germany grew fat by selling to the rest Europe and pocketing revenues these other countries had borrowed. Greece for instance increased civil service perks, increased the size of the civil service itself, but didn't grow revenue business significantly. Due to the common currency policy, PIIGS cannot print money to ease the pressure, monetary policy is governed by ECB and the EU govt in Brussels.
Also, in the early days of the monetary union, European countries with weak economic numbers like Italy "played" with their budgets and forecasts, restructuring debt, painting a rosier picture than was really the case. The truth is, weak economies shouldn't have been allowed to join the Euro. It would be like pretending Kenya and Somalia are almost equal economic partners. But politicians being politicians brushed away the protests of the economists and ploughed ahead.
There are always problems with rapid growth financed by debt, it is not sound. And in Greece the debt is astronomical, its like they went crazy over there with the borrowing. So, govt bonds sold to various investors are now due and there isn't enough revenue to service this debt. To avoid default, the ECB has to loan Greece money to service immediate obligations. These loans (or the debt restructuring) come with harsh conditions, like a drastic expenditure cuts, raising of taxes. When the govt stops spending, all private sector and other businesses that are supported by it start dying off - higher taxes mean even relatively healthy businesses start finding it harder to survive. A downward spiral that keeps reducing revenues and requiring even larger bail-oust commences.
They can resolve this in 2 ways - i) forgive the debt completely ii) default and leave the monetary union.
Argentina defaulted in the mid-90s and is now doing OK.
The banks can't be allowed to fail; When they fail, they wipe out all the deposits and assets - setting off panic everywhere. The contagion in cases like this affects all banks. So as a government do you allow an entire country's banking system to collapse? How will business proceed from then on?
Anyhow @bkismat, this is a long and complicated issue, they will write books about this