The eurozone is starting to show the cracks as the ratings agencies start to downgrade these sovereign ratings. There is a big down day on the horizon as panic will set in when Greece admits that its insolvent. Not something imminent, but something to look forward to in 2010. Bad news is a brick in the wall of worry until market actually starts paying attention. Then things turn to panic quickly.
Britain and the US aren't far behind. California is in the toilet and Illinois had their credit rating downgraded two notches. There's trouble on the horizon. http://www.sj-r.com/news/x639781245/Fitch-drops-state-credit-rating-two-notches
UK CDS spreads are now actually higher than Portugal, which is a member of PIGS (Portugal, Ireland, Greece, Spain), so someone has to think off another clever acronym that includes the UK http://ftalphaville.ft.com/blog/2009/12/09/88001/better-at-football-and-sovereign-risk/
Well, the UK is less likely to default because they have their own currency, Spain is tied to the euro and can't print their way out of their problems. But fear is starting to percolate for sure. At 1090, we could drop huge easily.
Being in the Euro club has it's advantages, if the ECB bails out portugal (which they are very likely to do) then in effect all the stronger countries like Germany are indirectly subsidizing portugal. However, if the UK is in serious trouble, their currency will plummet like a stone, sending their interest rates through the roof which will cause the gov to likely default or at least ask for an IMF bailout (it's happened before). So I think the UK is at the very least just as screwed as portugal or spain.
What happens when the IMF has no more money? Yes, being in the Eurozone has it's advantages - for everyone but the Germans. I'm sure the Germans would be thrilled at bailing out Portugal and Spain. And Greece. And Italy. Oh yes, happy days are here!
Looks like the Germans will finally conquer Europe after all! But not exactly as they hoped it would turn out.