The Greek debt negotiations haven't finished, and while the private sector bond holders may get 50% losses, Greece will not cut 50% of its debts, as the official lenders are not taking losses. Greece would be better off simply defaulting fully, as it will still end up with government debts of 150% of GDP or so after default.
Also if the countries default the banks do too, as they hold a lot of the government debt - it was a mutual game.
Agreed. Banks were previously bailed out on the basis that this would be terrible for the people whose assets/savings were held at banks that failed because they could not return those assets to the people.
But things have changed since then... firstly governments have guaranteed people's assets in the event that a bank fails. In addition some countries took charge of their banks, notably the UK, meaning that at least from a "business as usual" case, it is not inconceivable nor technically impossible to move the accounts from a failing bank into a nationalised bank.
So if the banks were to default now, the situation would be different. The governments could let a bank or many banks fail and with careful management take back control.
One other point is that banks can make very large profits in a very short space of time. LloydsTSB in under six months following the write-down of massive losses in the crisis, made a first quarter profit of 3 billion pounds. I don't know many companies that can turn things around that quickly, but banks regularly do.
This, to my mind, makes it less credible to hold the threat of many banks defaulting over the heads of the governments, and is another reason why I say the governments make the call.
Also if the countries default the banks do too, as they hold a lot of the government debt - it was a mutual game.