The Next European ETF Dominoes to Fall?

One day it's Greece. The next day it's Italy and the unfortunate reality is that Europe will remain a mess for the foreseeable future as policymakers grapple with ways to fix the Euro Zone's epic sovereign debt crisis. It's going to take a while and as investors in the U.S. have become all too accustomed to seeing, Europe's problems have a way of trumping positive economic data here in the States. Well, one could exact some revenge with the ProShares UltraShort Europe EPV or by shorting the Vanguard MSCI Europe ETF VGK or the iShares MSCI Italy Index Fund EWI. Those are the obvious choices right now, but let's have look at a few other European ETF dominoes that could fall. Hopefully, they won't, but it's best to be prepared. iShares MSCI Spain Index Fund EWP: Somehow, someway the iShares MSCI Spain Index Fund is up today as of this writing. That's after an auction of Spanish debt fell $600 million short of its goal, according to the Washington Post. That means lenders aren't eager to support Spain. We were bearish on EWP back in 2009 and the longer the ETF struggles to stay above $32, the more technical issues it will have. Even EWI has outperformed EWP in the past three months. iShares MSCI Belgium Investable Market Index Fund EWK: Did you know that Belgium has been negotiating a new government for more than 500 days? The country's budget deficit could grow to 4.6% of GDP in 2012 and the country is facing possible sanctions from the European Commission as a result, Bloomberg reported. Making matters worse, EWK has an awful chart. More macro problems in Belgium and this ETF could be on its way to $10. iShares MSCI France Index Fund EWQ: Let's hope things don't get this far. France's three largest banks have already endured credit ratings downgrades and now there's speculation the Euro Zone's second-largest economy could be in danger of losing its AAA credit rating. EWQ's performance over the past three months has been so troubling that lags EWI...by a healthy margin. Below $20, EWQ is vulnerable to panic selling that could drag the ETF down to the $16 area if the headlines get really nasty. iShares MSCI Poland Investable Market Index Fund EPOL: Let's be clear: We're not saying Poland is going to fall. The emerging Europe nation isn't even part of the Euro Zone. However, our prognosis of Poland ETFs being guilt by association plays has proven accurate. Earlier this week, Moody's downgraded Polish banks because of Poland's economic ties to Western Europe. Germany, France, Italy and the Netherlands are four of Poland's five largest trading partners. That might be enough to stay away from EPOL for now. Bull case: In the near-term, there might not be a bull case for EWP and EWK, but France could emerge from the crisis relatively unscathed using its economic heft to do so. Poland is still worth a look as a viable Europe rebound play or for the investor looking for emerging markets exposure. Bear case: Do we even have to talk about it? The worse these ETFs perform, it probably means nearly all asset classes are plunging.