Bracing For The Euro Without Greece... Other PIIGS Too (EWG, EWQ, FXE, EWI, IRE, IRL, NBG, GREK, EWP, STD, BBVA, VGK, FEZ)

So much for any great help from the ECB, France, Germany, and any other entity being able to help the Euro stay together.  Rumors have been out that nations have been instructed to make contingency plans for what they will do if Greece does in fact leave the Euro.  Make no mistake here.  Greece IS leaving the Euro as it stands today.  It is a question of when and how.  It would take a miracle to make the Greek issue go away even if a solution comes up again.  After all, didn’t they just make an agreement to stay in good graces with debt swaps and austerity earlier this year?  Greece could get booted out now, or they could leave via electoral action.  The return of the Drachma is coming and Europe has to deal with the fallout.

The financial damage is massive and the question boils down to how far the contagion can spread throughout Europe (and elsewhere).  Austerity measures throughout Europe are now backfiring.  France put in Hollande as a move back to the left as Sarkozy’s austerity measures were just going to be too great for the population to want.  Inflation before cutbacks!  Live well today, let the kids figure it out when hey get older!  Hell, even The Netherlands could not agree on a budget and they have their act together financially just about as well as any of the top nations.  Angela Merkel’s party suffered a regional election loss in recent weeks as well.

Greece will not likely be the only casualty here.  Portugal, Spain, and Ireland are all at risk.  Sinn Fein has been making policy statements about austerity and the Euro inclusion and went as far as issuing a video to call for a NO vote in the Austerity Treaty referendum.  Spain has a serious capital shortfall in its banks if the reports over the size of the property value losses versus face value of loans is even only one-third true.  Portugal is just totally irrelevant to Europe, but it is upside down and at risk.  And Italy is just simply “too big to bail” with its debt and spending issues that lie ahead.

The fallout is running top to bottom… safe havens to PIIGS… We are seeing all the new 52-week lows come into play in some positions while many others are still above those recent lows.

iShares MSCI Germany Index (AMEX: EWG) is down 2.2% at $19.87 against a 52-week low $16.96; iShares MSCI France Index (AMEX: EWQ) is down 2.4% at $18.61 against a 52-week low of $17.88. The there is “the Euro currency ETF” via the CurrencyShares Euro Trust (AMEX: FXE) with a drop of 0.9% at $125.03 (new 52-week low) as the Euro is at the lowest point since July 2010.  iShares MSCI Italy Index (AMEX: EWI) is down 3.8% at $10.26 and only one-penny above the $10.25 52-week low.

Ireland… The Bank of Ireland (NYSE: IRE) is down 2% at $4.90 against a 52-week low of $3.99. The New Ireland Fund, Inc. (NYSE: IRL) is down 1.1% at $7.79 against a 52-week low of $6.49.

Greece… National Bank of Greece SA (NYSE: NBG) is flat at $1.52 against a 52-week low of $1.45; Global X FTSE Greece 20 ETF (AMEX: GREK) is down 3.5% at $9.99 at a new 52-week low (prior $10.25 low). The election in mid-June will likely be the key determining factor here.  If not, the situation is still not over and Greece is going to be an ongoing flight risk.

Spain… iShares MSCI Spain Index (AMEX: EWP) is down 3.3% at $22.81 and under the prior 52-week low of $22.87.  Banco Santander, S.A. (NYSE: STD) is down 3.5% at $5.58 against a 52-week low of $5.52 and Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA) is down 4% at $6.02 against a 52-week low of $5.96.

Vanguard MSCI Europe ETF (AMEX: VGK) tracks the  MSCI Europe Index, which is made up of approximately 460 common stocks of companies located in 16 European countries-mostly companies in the United Kingdom, France, Switzerland, and Germany.  It is down 2.6% at $39.85 against a 52-week low of $38.40.  The SPDR EURO STOXX 50 (AMEX: FEZ) tracks the STOXX Europe 50 Index and it is down 2.9% at $26.93 against a 52-week low of $26.10.

This is sort of funny on the surface if you don’t think about the financial and human tragedy that is unfolding.  It is not exactly as though the global economy rose this much when they launched the Euro.  Little reward, massive pain!

Sadly, Europe is starting to feel like Latin America of the 1980s and early 1990s all over again.

JON C. OGG