Factbox - Quick Guide to the Greek crisis

(Reuters) - Greece's problems servicing its debt have prompted fears it could default and spark a global financial crisis similar to that which followed the collapse of U.S. investment bank Lehman Brothers in 2008.

ORIGINS OF THE CRISIS

Greece, whose economy had grown strongly but suffered problems with corruption and bureaucracy, joined the euro zone a decade ago, linking its economy to other European countries.

It went into recession in 2009 after 15 years of growth and its budget deficit hit 15.4 percent of GDP after a series of revisions by the government which undermined investor confidence and drove up borrowing costs.

In May 2010 it became the first euro zone member to receive a financial rescue package from the European Union and International Monetary Fund.

The 110 billion euro package was meant to see it through three years, but since then deficit and debt levels have increased and the recession has worsened. Greece's debt pile now totals around 150 percent of its annual output, and is growing.

A second package, worth an additional 120 billion euros, including 30 billion euros from privatisation of Greek state assets and a similar amount from private creditors, is now being discussed.

Until future funding is agreed, at least in principle, doubt hangs over payment of the next 12 billion tranche of the first package, which is due on June 29.

The cost of insuring Greek debt has soared and it is now the highest in the world, above Venezuela. The value of Greek 10-year bonds has fallen, pushing yields above 18 percent for the first time since the launch of the euro, about 15 percentage points higher than the benchmark German bund.

Until the IMF, the European Union and Greece can come up with an aid package that will calm investors, the costs to Greece of servicing its debt are likely to continue to spiral.

GREEK POLITICS

Prime Minister George Papandreou has faced strikes and mass street protests, sometimes violent, against the austerity measures which have been the price of the EU and IMF aid. These include curbs on widespread early retirement, cuts in benefits and wages and tax hikes. Unemployment is also on the rise.

The ruling party is split and his efforts to form a national unity government to enact the latest reforms collapsed on June 15, rocking financial markets worldwide. Analysts say Papandreou is likely to get the plan through parliament nevertheless, but that public anger is unlikely to abate.

HARD OR SOFT LANDING?

European governments are keen to avoid a "hard default" as that could threaten banks throughout the euro zone and further afield.

They are therefore discussing a "soft landing" in the form of a debt extension or voluntary rollover by creditors, but some of the proposals have been criticised as default by another name.

GERMANY'S ROLE

European taxpayers, particularly in Germany, have funded much of Greece's bailout, denting the popularity of German Chancellor Angela Merkel and prompting calls for private creditors to start sharing the burden. That has made a second bailout even more of a political liability for Germany's ruling coalition.

Berlin has proposed that investors agree to extend the maturities on some Greek debt by seven years; credit rating agencies have said they would consider this akin to a default.

Merkel has been accused of holding up the second Greek aid package, further eroding investor confidence which could make the bailout more expensive.

HOW COULD THE CRISIS SPREAD?

Countries most vulnerable to contagion include Portugal, Ireland and Spain, analysts say, with Italy, Belgium and even France as well European companies possibly affected as well.

The fallout from a Greek default could hit the European Central Bank, and banks worldwide may stop lending to one another because of fears of exposure to European debt.

Because of the bond-buying program the ECB reluctantly put in place last year, it is now has exposure to an estimated 40 billion euros of Greek sovereign debt, not including bonds it has accepted as collateral in its lending operations.

The White House said on June 16 the Greek crisis was acting as a headwind to the U.S. economy but opinions vary as to the level of exposure of U.S. banks.

The big contrast with the Lehman Brothers collapse is that this crisis has been building for a long time. Some analysts say world leaders will not allow it to spiral out of control.

(Writing by Philippa Fletcher; Editing by Jon Boyle)