This thread is being started late but I thought I'd use this one to summarize what's happening and talk about possible scenarios. Europe is now discussing how to "Save the Euro" when just months ago they insisted their banks were fine.
As it stands now, Italy and Spain are very close to defaulting based on the increasing returns on their bonds to entice investors (I never considered Greece and I won't consider any of Europe). IMHO there's nothing that can be done to stop this spiral, the banks may be saved like in the USA but the defaults will inevitably happen and the EU admits they can't afford to bailout Italy or Spain. Moody's and S&P are both talking about downgrading all the Euro countries.
The only question about the downgrade and default of some Euro countries and the breakup of the region and maybe Euro itself is how fast and how bad will it be? Some are even predicting possible anarchy both politically and financially as the EU collapses.
The Bank of Canada has been increasingly dire in their predictions about the Euro in recent weeks and just issued another one now.
Bank of Canada governor Mark Carney is warning that eurozone banks are trying to reduce their indebtedness in "a vicious deleveraging process" as the region sinks into recession, a downturn that is beginning to be felt in the rest of the world.
Carney warned that the world’s advanced economies have spent a generation accumulating a “mountain of debt,” with global public debt to global GDP reaching a ratio of almost 80 per cent, a level that has “historically been associated with widespread sovereign defaults.”
If the process of reducing debt is mishandled, he said, it could lead to disorderly defaults and social unrest.