Next Crash: Which Global Market to Blame?

(Article on the prospects of a second double-dip global economic collapse updated with additional analyst commentary on the outlook for the euro and other indicators of global economic weakness.)

NEW YORK (TheStreet) -- Just when we thought we were headed out of the recessionary woods, the international markets seem determined to drive equity investors back into shadows befitting the largest trees from China and Europe.

In the case of Europe, it might be more apt to describe the rising fears as being the height of Mount Olympus, while in China, the fears are less about felling trees than a coming devastation in China's property market equal to the environmental devastation wreaked in the building of the Three Gorges Dam.

Last Friday, when the Federal Reserve signaled its first significant step in the increasing of unprecedentedly low interest rates, fears of the euro's decline versus the dollar came into sharp relief. The euro is already down 5% against the dollar this year, and on Monday morning analysts were showing more bearish attitudes about the trend for the euro, with several analysts cutting their 12-month euro estimates. The euro is down 6.1% since Jan. 14.

The euro slide was just the latest uncertainty about the European economy, though. The past several weeks of global market uncertainty have prominently featured the Greek budget tragedy, and there has been a mounting investor version of the Greek chorus crying out that the European Union's budgetary shortfalls could spell recessionary double dip for the global markets.

Greece may only represent 2.5% of the European Union's gross domestic product, but Italy, Portugal, Spain and Ireland are seen as next in line behind Greece as limbs of the EU standing on shaky economic versions of the Achilles Heel. Last Friday, the euro hit its lowest price since May. Italy has the second-largest debt plate in the region.

Greece had a budget shortfall of 12.7% last year, more than four times the limit allowed for euro countries, and the highest debt level among all 27-nation European Union members.

Greek and European finance ministers assured investors last week that the plan to fix Greece's deficit problems is moving ahead, but rating agencies are awaiting proof.

The EU's accounting watchdog last week demanded that Greece divulge information on the swaps agreements it has in place with banks -- press reports indicate that there may be as many as 15 banks involved in derivatives deals with Greece that have helped the nation to hide its level of debt behind the securities world equivalent of smoke and mirrors.

What's more, economic data from Europe also showed that the continent's economic recovery had more or less stalled. Gross-domestic product in the 16-nation euro region increased 0.1% in the fourth quarter, one third the rate economists had forecast in a Bloomberg survey.

Greece's woes and the European Union's inability, at least so far, to put out the debt fire, has stoked fears that the European Union could even break apart. Greek government bonds fell again last week amidst the fears that its deficit-busting measures will be insufficient, and that the European Union response still lacks clarity.