The debt, along with all of the banks that own the debt go sliding right down into the sea. And they will take a dozen or so large European banks with them. And they in turn take a couple of large us banks with them.
It’s all about credit default swaps.
That’s pretty much the case but with one extra step. Greece’s debt isn’t large enough to take out the banks. But the PIIGS as a whole are enough to wipe out a lot of banks in France and Germany. Greece is just one domino but they don’t want it to fall.