I have always been skeptical of the possibility of a Eurozone breakup because I couldn't see a plausible mechanism which would bring it about, or any rational reason for any nation to pull out.
However, for a while now the German leadership has not been behaving completely rationally.
I thought of one way the show could spiral out of control and lead to a breakup. Here it is:
An Italian default, and a refusal (or hesitation) of the ECB to stand over the debts, leads to a run on the French banking system (which owns huge amounts of Italian bonds). Queues form outside the banks in cities across France, and leading into the election, Sarkozy tried to calm the situation by saying France will guarantee all deposits.
Loose talk about France's inability to do so given the sums involved, and negative German comments makes the situation worse. The media goes into overdrive and the bank run accelerates.
The french government decides to quietly bypass the ECB (which is prevented from acting by the Germans) and print its own Euros to ensure no-one loses cash.
But it is also running into a German election, and the news leaks. The German media and politicians freak out and stories circulate about a wave of inflation due to the French illegal printing of Euros. Some candidate in Germany foolishly says he would close the borders if the situation gets worse.
This leads to fears that Germany will end the free movement of capital, and money does start to pour out of the rest of the EU and flood into Germany, in anticipation of a German euro exit. On exit, Germany, it is thought, would convert all euro in its borders into D-Marks, which would rise in value, making profit for those who manage to get their money to Germany on time. Banks in every state face collapse.
One by one, EU states impose emergency 'temporary' capital controls preventing money being transferred out. Some countries announce they will follow France and print new Euros to ensure their banks can honor deposits during the crisis.
Stalemate is achieved for a while, trade becomes difficult due to capital controls and the uncertainty of what 'euros' come from where, and whether they are worth anything in other states. Shipments of critical goods, oil, etc, are delayed.
Many summits and conferences are called, but no decisions are taken. Finally, some country announces they will split altogether and reprint their own currency. After that, everyone is forced to act.