If the such as the USA , UK , Italy etc decided to default on it's debts , then it would effect those it owes money to.
Like me and you , if you owe your Brother ,Sister or mate money and then don't pay them back , they suffer the hit.
Now who leant money to these country ?
Other nations , banks and financial institutions.
Money is borrowed in the forms of bonds.
ie Pension funds buy bonds and get interest paid on the bonds and when the bond matures , they get their money back.
In this case pension funds would crash ....insurance firms buy bonds via your endowment money ...so these would also fail.
Banks would take a hit and maybe crash ...
It would also make it hard for these states to borrow money in the future , unless they pay a higher interest rate , due to the higher risk of lending to them.
Simple solution is to spend only what you earn.
Reduce spending ...Earn more money ...
i.e. Less government spending ....higher tax intake via growth
In my view the worlds economy is on the brink and will have a huge crash in the next 12 months.
If you think times are hard in this country now ...you aint seen nowt yet :-)