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Eurozone: Too Big to Save!


Earlier today ratings agency Moody's (MCO) downgraded French banks SocGen and Credit Agricole, and kept BNP Paribas on review, due to concerns about the banks' holdings of Greek debt. In short, the credit worthiness of what amounts to the entire private French banking system is being infected with Greece's worthless paper. France catching the Greek's disease is precisely what the early stages of a banking contagion looks like.

Breakout has warned our audience about the death of the Eurozone for months. Frankly nothing much has changed in my view. I reiterate my contentions that the Eurozone will fail and the Euro currency will cease to exist, or at least be unrecognizable in a year if not sooner. The implications for portfolios of U.S. investors are huge.

For those who might argue that European troubles can be contained, I would direct you to a chart of Germany's benchmark stock index, the DAX, for the period from March 2008 to March 2009 --the meat of the US financial crisis. The DAX fell in nearly perfect lockstep with the S&P 500. The US financial system is unarguably in better shape than it was in 2008. That being the case, perhaps US markets will only fall 1% for every 2% decline in the DAX.

Europe's economy is far too big to remain a Europe-specific problem. It's that simple.

For the vocal majority of those who find me too strident, allow me to offer a collection of outside reading on the topic of the death of the Eurozone.

Here is your syllabus. There will be no test from me on this reading, but there is a rather massive test ahead for the global financial system. It's simply a matter of when.

Sir Martin Wolf: "Time for Germany to Make its Fateful Choice"

Jefferies via ZeroHedge.com: "Jefferies Describes the Endgame: Europe is Finished" (ZeroHedge's headline)

Dennis Gartman: The Gartman Letter (Subscription required)

Barry Ritholtz' The Big Picture: "Save Ferris"