The long answer: https://en.wikipedia.org/wiki/European_debt_crisis https://en.wikipedia.org/wiki/European_debt_crisis TLDR: Greek debt is used as collateral f

The long answer: https://en.wikipedia.org/wiki/European_debt_crisis https://en.wikipedia.org/wiki/European_debt_crisis TLDR: Greek debt is used as collateral for loans by European banks. When Greek debt takes a haircut, most (nearly all) European banks have to choose one of two options : either they can raise capital equivalent to the net Euro value of the haircut OR they have to reduce the amount they're loaning out by the net Euro value of the haircut times 100 (it was times 50 in the last crisis). In practice for most banks that will mean raising 3-4% capital (which will still seriously impact their share price of course), but apparently in a few cases it's near-distressed banks that'd need 20%. Most banks will use a combination of both, so this will mean that effectively money loaned out across Europe by banks will have to reduce by 5%-10%. [1] https://www.ecb.europa.eu/mopo/implement/mr/html/calc.en.html https://www.ecb.europa.eu/mopo/implement/mr/html/calc.en.htm...