There were three main stories; all of them bad.
That all came to a head at the end of this past week. The ball has now been thrown into the court of Italian President Napolitano (a separate position than PM, who serves a seven-year term, and whose job it is to facilitate the establishment of a government). Another election this year looks very likely.
Since the February election, there have been polls in Italy showing strength for Berlusconi and Beppe Grillo, so if there were another election there's a good shot that the winner would be someone who doesn't have the same inclination to play nice with the rest of the Eurozone.
The economy is a trainwreck. This is really the big one. The European economy is really going to crap again. We'll find out more soon, as we get PMI numbers for March on Monday, but we already know how bad the month was. Flash PMI numbers for France and Germany were awful.
The Citi Eurozone Economic Surprise Index (which measures the strength of the data relative to expectations) absolutely PLUMMETED in March. Big thanks to @guan for putting the chart together for me.
So the economy just got completely taken to the woodshed in March in the Eurozone.
And that's going to make everything else worse. Deficit targets will be missed. Voters will be more radicalized, and so on.
March was a truly horrible month for Europe.