A lot of people lose a lot of money. Many institutions hold first-world sovereign debt as supposedly almost risk-free investments with guaranteed (fixed-income)

A lot of people lose a lot of money. Many institutions hold first-world sovereign debt as supposedly almost risk-free investments with guaranteed (fixed-income) returns. These institutions include banks, pension funds and other investment funds and vehicles into which both corporates and individuals will have invested their money. Plus you also have those that have insurance against a sovereign default, largely through credit default swaps (CDS). However unlike many forms of insurance, you don't need to actually own the bond to take out a CDS on it. In this way many people will trade the risk of a Greek default without actually going anywhere near the physical asset. Being a derivative product, the size of the CDS market on Greek debt is likely to be many, many, many times greater than the size of the underlying basket of bonds. So if Greece defaults - or even "technically" defaults, which could include the proposed rollover into longer-dated bonds - this could have huge implications for people who are short this insurance. They're all going to have to pay out. Apart from the direct financial impact, with Greece you have the additional embarrassment and complication due to being part of the Euro. Greece may be forced to leave the single currency, which is going to be a costly and messy exercise, and severely damage the reputation and credibility of the currency.