CDS and therefore sovereign debt markets under threat

If any Greek or other debt default, or "haircut", is not deemed a default then credit default swap (CDS) debt insurance will not be called upon.  That would render CDSs useless, leaving lenders with uninsured losses.  That in turn would destroy confidence in the CDS market, which would render sovereign debt uninsurable and therefore unsellable.  This would make European sovereign debt rollover more difficult, or impossible for broke nations.  That would in turn place a greater financial burden on Europe who would be insurers of last resort.  I acknowledge Jim Sinclair and Eugene Stiglitz for their commentary on this matter.