So around 10pm EST Europe's leaders came up with a plan. They announced a 50% "hair cut" on Greek debt (in fact this applies to public bonds and bank loans only -- sovereign exposure is excluded. Total write-down is about Euro 150 billion (or about 1/3 of Greece's total debt burden)). It's a start!
On another front, the International Swap and Derivative Association (ISDA) agreed that the 50% hair cut was not a credit event, because the write-down was voluntary. The impact is that all these financial institutions that bought (or sold) credit default swap on their sovereign exposure found out last night that these instruments are worthless (if a 50% write-off is not a credit event, what is?). These were always stupid financial instruments, it assumed that governments would not react to instruments that allowed the financial world to bet against the government's (worse) behavior. Last night sovereign credit default swaps died, they will not be missed.
Another stupid Wall Street invention bites the dust!