Facing a bruising recession and a bloated and inefficient economy, Greece is having trouble paying off the heavy

"sovereign" debt it owes to international bondholders. The European Union, the International Monetary Fund and the European Central Bank have required the country to implement a painful austerity plan as a condition of receiving a potential $17-billion rescue package, the second such bailout for Greece. The proposed budget cuts and tax increases have touched off rioting in Athens by citizens who say the effects on them would be too draconian.

The biggest threat would be a drying up of credit worldwide. As banks and other lenders are hit with losses, they could drastically rein in lending activity, thus throwing a monkey wrench into the global economy.

In addition to a likely hit to the stock market, a tourniquet applied to the global credit markets could crimp the already listless U.S. economy. Beyond that, a default theoretically could cause losses at normally super-safe money-market mutual funds. U.S. banks have limited exposure to Greece, but some European banks have large holdings of the country's debt. And some money funds have invested heavily in those banks. The 10 largest U.S. "prime" money funds have about half their assets stowed in European banks, according to a report from Fitch Ratings.

conclusion