The problem with sovereign debt is that it is likely to be inflated away instead of getting restructured. As a result, all lenders lose, borrowers win, all hold

The problem with sovereign debt is that it is likely to be inflated away instead of getting restructured. As a result, all lenders lose, borrowers win, all holders of risky assets lose as risk premiums go up. To make things worse, inflation makes its way through the economy unevenly, distorting prices and leading to misallocations of resources. As a result, real wealth is destroyed.