( CNN ) -- Financial markets were in turmoil on Wednesday amid fears that more countries could be sucked into Greece 's mounting debt crisis . European indexes followed those in Asia into the red after Standard & Poor downgraded Greece 's debt rating to junk status and Portugal 's rating also dropped two notches . So what has prompted the crisis and what could happen next ? How did Greece get into this trouble ? Years of unrestrained spending , cheap lending and failure to implement financial reforms left Greece badly exposed when the global economic downturn struck . This revealed partly fiddled statistics that showed debt levels and deficits exceeded limits set by the European Central Bank . How big are these debts ? National debt , put at €300 billion ( $ 394 billion ) , is bigger than the country 's economy , with some estimates predicting it will reach 120 percent of gross domestic product in 2010 . The country 's deficit -- how much more it spends than it takes in -- is 12.7 percent . Greece crisis deepens on global market sell-off . What does the credit rating downgrade mean ? The credit rating is an assessment of a country 's ability to repay its debts , and Tuesday 's downgrade to junk status , the lowest in the eurozone , means Greece is viewed as a financial black hole by foreign investors . Institutions such as pension funds can no longer buy Greek bonds and it leaves the country struggling to pay its bills as interest rates on existing debts rise . The Greek government of Prime Minister George Papandreou , which inherited much of the financial burden when it took office late last year , has already scrapped most of its pre-election promises and must implement harsh and unpopular spending cuts . And any bailout from the International Monetary Fund ( IMF ) is likely to mean more austerity measures must be introduced . How does this affect the rest of the world ? Greece is already in major breach of eurozone rules on deficit management and with S & P downgrading the country 's debt rating to junk status , this reflects badly on the credibility of the euro . With other countries such as Portugal , Spain , Italy and the Republic of Ireland all wobbling under massive debts this means a sizable chunk of the eurozone is under great strain . This could knock the whole eurozone into the red , affecting the whole world economy . And if Europe needs to resort to rescue packages involving bodies such as the IMF , this would further damage the euro 's reputation and could lead to a substantial fall against other key currencies , especially the U.S. dollar . And what does it mean for ordinary people ? If you own shares in banking groups that own Greek bonds , through your pension fund for instance , or in any euro-denominated company in fact , these are likely to have been hit hard . But if you 're traveling to Europe on vacation , it is likely your own currency will go further , especially if you have dollars . So what is Greece doing ? As already mentioned , the government has started slashing spending and has implemented austerity measures aimed at reducing the deficit by more than €10 billion ( $ 13 billion ) . It has hiked taxes on fuel , tobacco and alcohol , raised the retirement age by two years , imposed public sector pay cuts and applied tough new tax evasion regulations . How have these measures been received ? Badly . There have been warnings of resistance from various sectors of society and workers across the country have staged strikes closing airports , government offices , courts and schools . This industrial action is expected to continue . How are Greece 's European neighbors helping ? Led by Germany 's Chancellor Angela Merkel , all 16 countries , including the other ailing countries such as Ireland , which make up the eurozone have agreed a $ 50-billion bailout plan for their ailing neighbor . Last week , Greece announced it would finally tap this package . The package involves co-ordinated bilateral loans from countries inside the common currency area , as well as funds and technical assistance from the IMF . Any European-backed loan package requires the unanimous approval of eurozone members , meaning any country in the zone , would have veto power . Merkel 's government is under international pressure to put forward the money , but with state elections scheduled for the next few days , it is also facing great pressure at home to hold back . Will the IMF have to produce a bigger package and how soon ? There is much talk in the markets that the IMF would and should increase its portion of the Greek bailout and fast . Should the IMF come up with say another $ 15 billion would it be enough ? Some people want to see a knockout loan from the Eurozone and IMF closer to $ 100 billion to give Greece enough firing power to cool the speculation on a default . CNN 's Jim Boulden contributed to this report .
Financial markets in turmoil amid fears more countries could be sucked into Greek debt crisis . Greece 's debt rating downgraded to junk status , Portugal 's rating also lowered two notches . The European Central Bank has been pumping billions of euros a month into the economy and is expected to keep doing so for some time. Country has implemented austere measures to try to curb debt .