Moody's and Fitch Downgrade Europe, Dexia bailed out...where does it end?

This week will surly go down as one of the worst, in global economic terms, since October 2008. Fitch downgraded the credit worthiness of several European countries, including Italy, Spain, Portugal, as well as placing some countries once presumed totally solvent up for review, such as Belgium. Between this, the Moody's downgrade of 12 UK banks, Greece's struggle to meet austerity requirements for their next bail-out tranche, and the forced recapitalization of Franco-Belgian bank Dexia, it looks like the catastrophe in Europe is coming to a head. And all of this coming on the heels of a bad end to a bad quarter...what comes next?

Well, as the markets this week reflect, I think the solution is coming sooner rather than later. With ECB President Jean-Claude Trichet scheduled for retirement next month, we can only hope that the new regime will take into consideration the aforementioned crisis and deal with the real issue at hand: deflation. While Trichet has been spending much political and actual capitol on battling inflation with more than one rate hikes since January, the money flow has all but ground to a halt. If I were a betting man, I would gamble that we are going to see a real-life TARP-like bail-out of banks in Europe, as well as a few shotgun mergers just to be safe. What is to be done about Greece is a different battle, and personally I think Europe would be better without Greece in the Euro.