With Greek Impasse, Europe's Debt Mess Is Just Beginning (Correct)

Story corrected to note that Hungary, while part of the European Union, does not use the euro currency.

BOSTON (TheStreet) -- U.S. investors have been frustrated by Greece's debt crisis and its threat to undo the common currency pact. With a deal up in the air again, investors need to start questioning when the focus will fall on other European countries with similar problems.

After missing a Monday deadline, Greek leaders finally secured a deal on austerity measures that were supposed to lead to a bailout, the second in two years. In the latest set of frustrating developments, European finance ministers withheld approval of the rescue funds as the plan fell short of demands.

Even if Greece had secured the second bailout, it wouldn't be the end of the ordeal. Greece still has a debt-to-GDP ratio of 160%, which will get reduced to 120% only if creditors agree to a debt swap deal by Feb. 13 and accept new 30-year bonds. Meanwhile, Greece's unemployment rate still remains above 20%. So while debt may be coming down, GDP isn't growing and will likely be impacted by the austerity measures.

As part of the European Central Bank's working paper series, Roberto De Santis modeled the spread of the fever from Greece, Ireland and Portugal. "The estimated spillover effect from Greece and the impulse response functions points to severe contagion risk hitting particularly Ireland, Portugal, Italy, Spain, Belgium and France," De Santis concludes.

"You are being held hostage," Paul Nolte, managing director with Dearborn Partners in Chicago, says of investors in the current environment. "The problem is that they have papered over the problem. They haven't written down the debt."

The debt woes of Europe don't begin and end with Greece, either. Italy, Spain, and Portugal are members of the euro currency that are running up against unsustainable debt. In May, Portugal became the third eurozone country to receive a bailout, following Greece and Ireland. Italy, meanwhile, was forced to implement austerity measures in order to save billions. Even Hungary is facing problems with a mounting debt pile

"This is the blueprint for Portugal, Spain and Italy," Nolte says of a potential Greece deal, if one is agreed upon. "People around the world are cognizant of the fact that there are other countries in the same situation. Whatever we do for one, there will be someone next in line asking for the same."

Europe has taken a page out of the same book Federal Reserve Chairman Ben Bernanke used: Buy up the toxic assets and transfer the risks. Like Bernanke, his European counterparts don't want you focusing on their balance sheet. But unlike Bernanke, Europe is dealing with sovereign nations, not troubled banks.