The thing with the Porsches is a hyperbole, but it's also true that Greeks have become avid spenders in the past decade. There is this Nielsen report that showed that in 2008 Greece was number 1(!) in (designer) brand awareness worldwide: http://pl.nielsen.com/site/documents/ConsumersandDesignerBra... . Not a healthy sign for a country that produces almost none of those expensive products.
Most of this money went to vitalize local markets that had no future, such as construction (building very expensive houses in a country that already has one of the highest home-ownership rates in europe), food/entertainment and retail. Very little was spent on investing, mainly because tight regulations make it hard to take business risks.
They spent the money.
It's no difference to running up a big credit card debt, but at some point you have to pay it back.
What went wrong for Greece was it maxed out it's government credit card and none of the banks would let them up their credit limit.
Now the goverment doesn't have a lot of money comming in but it still has a massive debt.
That debt has to be payed back or else they have to default (i.e. go bankrupt).
It went to Germany. But you can't hold them responsible for this mess. Germany is a export based country, they are also more productive than the Greeks. They have managed their money well.
The only thing is that the Euro facilitated such things more easily.
But Germany can't be blamed for it. Imagine you go to a supermarket and buy like crazy. You know you don't have a way of paying it back, but you keep buying. Soon you run out of your credit limit of buying more. Soon you are in a situation where you owe the bank a lot of money and have no money of retuning it back.
Who is to be blamed, can you blame the supermarket for selling stuff? Or the bank for lending you money? Or you for not knowing when to stop?
The last numbers I read for Greece's imports from Germany were very small, in the low one-digit range. So I am not sure this is valid to say "it went to Germany" although at the beginning of the crisis this was a picture the Greek newspapers were all too happy to paint: the wealthy, greedy Germans who got fat and rich off of all those Greeks buying so much from them...
Governments earn money with taxes, fees etc and spend money on infrastructure, health, pensions, education, public servants etc.
Now the problem with Greece is not unlike what is also happening in the US today.
The money the Greek government spent was always more than the money they earned.
To cover the difference they just printed Greek Bonds and sold these to European banks to cover the shortfall.
Where things went wrong for Greece is not long ago they printed another round of Greek Bonds only to find none of the banks would buy them.
So overnight the Greek government runs out of money and is broke.
Now they need German/French EU handouts to cover this shortfall but the Germans/Frenchs won't give them money uless they agree to big spending cuts.
Hence the current impass.
If it looks like a third world country, then where did all the money go? Presumably the majority of people aren't driving around in Porsches?