It's not a matter of repaying the debt. It's a matter of being able to afford future debt. Sovereign debt is generally sold as bonds, which either pay interest

It's not a matter of repaying the debt. It's a matter of being able to afford future debt. Sovereign debt is generally sold as bonds, which either pay interest or are sold at a discount. The question is: how much interest should they pay, or how large should the discount be? Ultimately, bonds, like much else, are priced by the market. A $1000 bond is only worth $1000 if the issuer does not go bankrupt before the bond matures. Therefore, the bonds are discounted by some amount that correlates with how high investors think the risk is that it will be paid back in full. A concrete example: Spanish 10-year notes. At the start of the year, investors demanded about 5% interest to account for the risk that the Spanish government would not be able to repay its debts. This means that for the Spanish government to raise €1000, it has to pay investors €50 every six months. However, this week that rose to 7%, effectively increasing the amount of debt the Spanish government must take on to raise the same amount of money. This effect can create a death spiral (as we saw with Greece) where skittishness in the market raises the cost of borrowing, which unnerves investors even more. So there's no way for investors to force the government to pay back all the debt. However, they can make it impossible to raise more money in the future.