If the Greek government defaults on its bonds issued by French and German investment banks, how does that prevent the French and German governments from paying back the money that they owe to investment banks in other Euro countries?


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If you borrow money from person A and lend it to person B, how does person B's default prevent you from paying back what you owe to person A?

That hypothetical situation is essentially the same between banks and governments among various countries, except that the number of entities is much greater than three (you, person A, and person B), thereby exacerbating the chances of contagion, panic, and a domino effect.


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