My instincts suggest that the markets will take a hand eventually, but I can't quite see what will trigger them or how they'll play it.
The mkts already are...you now have a near 7 % premium for Irish 10 yr money over German, that is unsustainable ....but it will get worse.
The mkts are waiting for another bailout package, which may or may not be announced at this summit.......but can Merkel deliver, or more to the point when will the German populace scream Nein. Even if they do announce another package, that won't be enough, as there is simply no-one with either the saveings or the credit rateing to borrow sufficient to bailout the losses. Meanwhile world long term interest rates are going to continue to rise anyway, adding to the burden. So the mkts will continue to pick off each country one at a time.
Then you have the inflation problem, that these bailouts feed, that too will drive the Germans bonkers, as they realise they are not only bailing out the deadbeats, but wrecking what is left of their own saveings.
At some point the end will be reached and then rates will really explode for the weaker Zero members and blow the Zero apart.