In 2011, European bank stocks are collapsing, so much so that the market capitalization of Apple Computers is now equal to the market capitalization of the top 32 European banks combined (source). Some of these bank stocks have dropped approximately 50% year to date. The banks' assets include their loans (via bonds) to European governments. The perceived value of these bonds are dropping because the market does not believe that these governments will be able to fully repay these loans.
These governments might have difficulty repaying these loans because their debts are too high. Their debts are too high because of the extra high deficits during the past recession and because of the multiple decades of deficits.
These European governments ran multiple decades of deficits because of their socialist programs and because democracy is a contributor to the debt problem (read more).
Due to the collapse of the European bank stocks, the European stock markets are collapsing. The collapse of the stock market is reducing the "wealth effect". When people feel less wealthy, they spend less and invest less in their businesses. This reduction of wealth and the high government debt levels are contributing to the probability of another recession.
Due to the drop of the European stock market, other stock markets around the world are dropping, reducing the "wealth effect" for people around the world. The European economy is the largest in the world, larger than the U.S. economy. Many of the largest American and Asian companies trade with Europe. Essentially, the economies around the world are highly integrated. Due to the slowing European economy, the other economies around the world will slow as well.
If and when European banks go bankrupt, some people may think that capitalism failed. However, the root cause is socialism, which caused multiple decades of deficits (read more). Some people may argue that Germany has socialism and it works. Like most other Western countries, Germany also has fake wealth with their debt to GDP ratio at 74-78% (source) and are also stealing from children.