Oui Oui? No No, France ETF The Next European Domino

Greece. Portugal. Ireland. Spain. It was probably only a matter of time before France got thrown in the European muck. In the world of ETFs that track individual European countries, the iShares MSCI France Index Fund EWQ has been a standout in 2010. A standout in a bad way. It's probably not surprising that ETFs tracking Austria, Germany, the Nethelands and Sweden have outperformed EWQ by healthy margins this year, but EWQ also trails the iShares MSCI Belgium Index Fund EWK and, gasp, the iShares MSCI Italy Index Fund EWI. Now there is speculation that France may lose its AAA credit rating, headlines that sent swaps on French government debt to a record today. How expensive is it to insure French government bonds? Well it would be cheaper to insure similar, lower-rated fare issued by the likes of Chile and the Czech Republic, according to Bloomberg News. EWQ got a nice bounce off support around $22.50 earlier this month, but the action hasn't been enough to get the ETF back to its November peak and rising credit default swaps aren't the bullish tonic EWQ needs at this juncture. One analyst quoted by Bloomberg says the chances of a downgrade to French debt isn't priced into the market while another said the country's rating is "susceptible" unless the deficit is "meaningfully" pared. That's not an invitation to be long and while EWQ is not optionable, it is shortable. If nothing else, EWQ can say it has outperformed the iShares MSCI Spain Index Fund EWP this year. Congratulations.