Sovereign Debt

aka National Debt for any sovereign Nation-State

Sovereign Debt default is when such a government defaults on paying back its creditors. The equivalent of Bankruptcy. This is typically triggered when creditors stop buying "new" debt from the nation, and its old debt "comes due" - it has no ability to Re Finance. This happens when the debt level of the nation reaches such a level that creditors predict a default or significant devaluation.

This is happening in 2010 in Europe as a result of the Credit Crisis 2008 - many European nations had invested in bubble-inflated assets (esp derivatives created in the US). http://en.wikipedia.org/wiki/2010_European_sovereign_debt_crisis

Sept'2011: Nathan Lewis on how a default isn't necessarily such a big deal. But he downplays the affects of not being able to run a Budget Deficit anymore.