The economic disaster in Greece has reached a crescendo in recent weeks, and the Greek tragedy is indeed worrisome. However, the real problem that Europe must confront is not Greece, but Italy, which represents 16.9% of Europe's total GDP. As the chart below makes clear, the GDP's of Greece, Spain, and Portugal are essentially sideshows to that of Italy and the Eurozone as a whole.
Europe simply does not have the resources to act as lender of last resort to Italy. Certainly, Greece is a major issue for Europe, but if Italy defaults, then the Eurozone will disintegrate.