The country would almost certainly reintroduce the drachma, which would devalue dramatically and quickly, making it even harder for Greece to repay its debts, and setting an even worse precedent.

BBC: Eurozone crisis explained

Some debts may even be forgiven, setting a precedent for others in Asia to follow.

CNN: Bracing for a Default

But the Chapter 9 bankruptcy case also is being closely watched nationally for the potential precedent-setting implications: whether federal bankruptcy law trumps the California law that says debts to the state pension fund must be honored.

NPR: Stockton Bankruptcy Decision Only The Beginning

There was also the possibility of setting up a special "bad bank" to take on the "toxic debts" of nationalised banks such as Northern Rock - which could eventually be sold on by the government when market conditions improve.

BBC: Clegg proposes 'government bank'