A Greece (Grease) Fire Of Epic Proportions

It looks as if it is all but certain that

on its debt, whether it receives the next tranche of its bailout package or not. Just look at the spreads on Greek debt over comparable German debt. The spreads are astronomic. Late Friday before the bell, Moody's hit us with a bombshell (although not unexpected, as nothing should be unexpected at this point) by saying it has placed

In the press release, Moody's said, "Moody's review will evaluate the weight of these growing risks in light of the country's high rating but also relative to some credit-strengthening trends that have been observed in recent years and are expected over the coming years, such as improved fiscal governance, lower budget deficits and a modest economic recovery." This morning, European Financial Stability Facility's Klaus Regling said that the guarantees for the EFSF will be raised from €440 billion to €780 billion in the future, which is being seen as a good thing for now, but if Greece fails, then all hell will break loose. The move to increase the guarantees was expected, and the futures are off their lows, as Spain, and ultimately Italy, are going to need bailouts in the futures. If Italy were to be covered, the guarantees would likely double in size. Yet, if Greece falls, it will be just the first domino, and these guarantees will not be worth the paper they are printed on. Tomorrow is a huge day in the history of Greece, as Prime Minister George Papandreou needs to pass a no-confidence vote in order to help get a portion of next tranche of its €110 bailout. Papandreou has said that Greece probably needs €170 billion, and it does not seem likely that German taxpayers will go for a number that high. The austerity measures that the Greek government is trying to pass has failed miserable, and ultimately led to Papandreou reshuffling his government. If Greece falls, then Ireland, Portugal, Spain and Italy are the next dominoes to fall in that order. The iShares MSCI Italy Index ETF

is a way to profit from an eventual Italian default, if and when we get to that point. There is a lot of talk that if Greece goes, it would be worse than Lehman Bros. For the reasons mentioned above, I have to think that's close to being accurate, as we could see the potential downfall of fiver countries with over $1 trillion in debt. If Greece goes, does Europe go with it? It sure looks that way. As they say, it is next to impossible to put out a grease fire.