Standard & Poor’s said Monday that the proposed bank plan to deal with the Greek financial crisis will cause a default—and one that will be felt worldwide. One plan proposed by the French government and banks “could require a private-sector debt restructuring in a form we would view as an effective default,” said S&P in a statement. While Greece’s €330 billion (about $479 billion) debt is not probably not large enough to set off a financial crisis in itself, the precedent of a eurozone default could cause other countries, such as Spain and Portugal, to fall into a similar fate. Another worrying factor is that Western banks—especially those on Wall Street—have built insurance on the debts of those countries, also known as credit default swaps, and the cost of paying off those debts would be crushing.
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