Greece has stolen all of the headlines in recent weeks as the over optimistic austerity measures put on them by Europe have failed to stop Greece being on the edge of defaulting. On its own Europe could save Greece, in the grand scheme of things Greece is a relatively small economy and its debt not that big.
However, whilst one eye is closely monitoring Greece, the other is watching Spain, Portugal, Ireland and especially Italy. 23 percent of the entire Euro Zone debt belongs to Italy -- it amounts to far more than its entire GDP.
If Europe cannot afford to let Greece fail, then they certainly cannot allow Italy to which is only a matter of time if Greece fails. The problem is Italy is probably too big to bail out, they have the eighth largest economy (based on nominal GDP) in the world, fourth largest in Europe. Realistically the only country with enough reserves to actually bail out Europe is China. The Chinese currently sit on over $3 trillion in foreign exchange reserves and could quite easily sort out Europe in one fell swoop.
Why would China get involved in Europe's mess though? In short, it is not in China's interest for Europe to fail, despite China's denial they are at the moment reliant on their export market of which Europe is their biggest customers, accounting for 22 percent of their entire export market. However, China wont just save Europe without some stringent fiscal policies in place to stop this money being frittered away.
In all likelihood any investment by China would be accompanied with the other BRIC countries which would see Europe come a full circle from the days of the Brady Bonds being issued to Brazil and other emerging markets back in the 1980s to help them out of their financial woes, now Europe have come back, cup in hand asking for the same help.
Europe is on a knife edge and I only see China/BRIC coming into save the day. The great depression of the 1930's will seem like a walk in the park if the troubled nations of Europe default.