The bond market, where banks, traders and governments cross paths, provides the setting. If Greece dropped the euro, traders would become more suspicious of Spain, Portugal and Italy and sell those countries’ government bonds, pushing their prices down and driving their interest rates up.

Higher borrowing costs squeeze those countries’ budgets and push them deeper into debt. Plunging bond prices also would imperil Europe’s troubled banks. The banks are big holders of government bonds, which they bought when the bonds were considered safe.

At this point, the risk would be high for a run on banks throughout Europe. People would worry that the banks might fail and would rush to withdraw what they could. Analysts and investors say that’s the biggest fear.

People in Spain, for example, have already seen what’s happened in Greece and have started pulling euros out of their accounts in fear the country will switch back to cheaper pesetas…

From here, the crisis could get much worse: Banks could fail, the surviving banks could stop lending to each other, and a credit freeze could shut down commerce in Europe as assuredly as a blizzard did last winter.