Break Up of the Euro Zone?

Banks including Merrill Lynch, Barclays Capital and Nomura issued a cascade of reports this week examining the likelihood of a breakup of the euro zone. “The euro zone financial crisis has entered a far more dangerous phase,” analysts at Nomura wrote on Friday. Unless the European Central Bank steps in to help where politicians have failed, “a euro breakup now appears probable rather than possible,” the bank said.

Given these dire predictions, euro zone leaders are still hopeful and not swayed. Chancellor Angela Merkel of Germany said that the break up of the euro zone will not happen.

With the downgrading of Belgium by S&P from AA+ to AA, there is a lot of pressure to make changes quickly. There are discussions that France could lose its AAA rating if their financial situation continues. Portugal and Hungary were downgraded to "Junk" status.

Banks are preparing for the worst and formulating their own plans to handle the euro zone debt crisis.