Yesterday, Standard & Poor's again downgraded Greece's debt, this time to junk level, and downgraded Portugal's as well. Stock markets across Europe dove on the news, confirming fears of bearish analysts that the Greek crisis woulde prove contagious. The New York Times quotes an Irish economics professor comparing Greece to Lehman Brothers. Just how bad is it? The resounding answer from the financial commentariat: bad.

  • 'The Most Important Week in the 11-Year History of Europe's Monetary Union,' predicts the Financial Times' By Wolfgang Münchau a few days ago. "What we are seeing here is Europe's equivalent of the US subprime crisis. Unless we hear some implausibly good news from Athens by Friday, it will soon blow up." By the end of the week, the crisis will have proved either containable or dangerously contagious.
  • 'The Europeans Can Only Blame Themselves,' mutters Michael Schuman at Time. "Leaving aside the fact that the Eurozone allowed some of its members to get into such dire financial condition in the first place, the current uncertainty-driven turmoil could well have been averted." He thinks leaders dragged their feet responding to Greece.
  • Greece Bigger than Lehman, Reuters finance blogger Felix Salmon reminds readers--at least in terms of debt. He points out that "there is no formal mechanism for leaving the euro (or for defaulting on sovereign euro-denominated debt, for that matter)," meaning that "there will almost certainly be a range of unexpected and chaotic events somewhere down the line." He, too, thinks there have been some missteps in Europe:
This is the problem with the way in which the EU insisted that Greece reach a point of desperation, exhausting all other funding opportunities, before it turned to Europe for help. At that point, it might be too late. And it’s going to be really hard to persuade Germany and the rest of Europe that lending new money at low rates to a country in this kind of fiscal situation makes any sense at all.
  • 'A Political Crisis,' argues Walter Russell Mead--not just a financial crisis. Portugal, Italy, Greece, and Spain (the "PIGS") can only be saved through bailouts from the north, and "Germans especially don't want to pay. It has been clear for some time that the Greeks cheated and lied their way into the eurozone, and for years they have pursued selfish and foolish economic policies.  Why, Germans ask with some force and logic, should German taxpayers who cannot retire until their late sixties pay the bill so that Greeks can retire at 55?"
  • Gosh They're Screwed  "Skip the political theorists," says National Review's Kevin Williamson, "and go to Moody's, where the analysts are predicting government 'fiscal adjustments of a magnitude that, in some cases, will test social cohesion.'"
  • Anyone Remember This?  The Economist's Ryan Avent lays out the possibilities:
A Greek restructuring looks inevitable. The question is, what happens then? And are European finance ministers and heads of state looking for ways to address the systemic sovereign debt issues, or are they just thinking that they'll take things on a case-by-case basis, muddling through until a tolerance for bail-outs ends and a major country defaults spectacularly? And why does that question sound so familiar?
  • Greek Bailout One Thing--Portuguese Bailout Another Thing  "The chances that the Eurozone will dissolve will rise," explains 24/7 Wall St.'s  Douglas McIntyre, "if a bailout of Greece is followed by one in Portugal."
  • Well At Least We Have a Plan for Financial Regulatory Reform  In the midst of this mess, Christine Lagarde and Wolfgang Schäuble, finance minsters for France and Germany, respectively, lay out a plan for preventing systemic risk in the Wall Street Journal.