There is always the possibility that Germany will agree to underwrite the sovereign debt problems of the PIIGS countries (Portugal, Italy, Ireland, Greece, Spain). How would that look? Imagine the concept of creating Eurobonds that all of the Eurozone countries stand behind (which would basically put Germany on a hook that they are not currently on) or have the ECB buy $ 2 Trillion of Sovereign debt (which would be pretty much the same thing). What happens then?
If this happens, you have the situation that will, in time, present itself to the US. There will be a massive debt that really cannot ever be paid off other than by simply printing currency and using the currency to continue to fund the debt. That means massive worldwide inflation with the purpose of destroying the "value" of the outstanding sovereign debt. If the inflation does not spiral out of control, this could work. It would be simply another way of defaulting.
Imagine a 10 percent inflation rate worldwide. In a reasonably short time, the value of outstanding sovereign debt would fall dramatically (along with all currency-denominated assets). In effect, you simply destroy the value of the sovereign bonds as you use the printing press to keep them current. If you can keep the inflation rate high but under control, this will do the trick. The danger is, of course, that inflation can have a mind of its own and might not remain under control. This could mean hyperinflation which could destroy the major economies of the world. But, it is possible that inflation could be kept under control at a high level. Who knows?
One side effect is the destruction of all of the entitlement programs. Social security and pension funds which are denominated in dollars will lose much of their value (politicians will find a way to eliminate cost of living indices that are in place to preserve the value of these funds). Health care programs are budgeted in dollars. They will become worthless as well. Public employees will find their salaries fixed and they will find themselves impoverished.
What will prosper in this environment is anything whose value is not stated and fixed in currency terms -- commodities, free market businesses, anything where prices adjust upward with inflation.
In other words, world wide inflation triggered by selling Eurobonds or some other equivalent scheme, is just a default by another name (see Rogoff and Rinehart's recent book, "This Time is Different").
Just plain defaulting would be much simpler, but may not suit the politicians as well as massive inflation.