Three Doomsday Scenarios: What Happens If the Eurozone Breaks Up?

The time has come to confront an ugly truth: The possibility that the Eurozone will break up, or rather fall apart, is growing increasingly likely. In fact, I'd say given recent developments in Italy the probability of a breakup is as high as 40%. Indeed, if a country as small as Greece or Portugal were to default or abandon the euro, the effect on the Eurozone would be manageable. The debts of those countries are too small to make more than minor dents in the international financial system, and they represent too small a share of the Eurozone economy for their departure to have much impact. The psychological effect of their departure would be considerable - if only because Eurozone leaders have expended so much money and effort to bail them out. However, devastated credibility among the major Eurozone leaders is more of a political problem than an economic one. But now that the markets' focus has moved to Italy and Spain, the Eurozone is really in trouble.