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
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