Cut in Greek Debt Rating

S&P cut the rating of Greek sovereign debt to single-B (moving it closer to junk status) today, sparking a selloff off in government bonds of similarly highly indebted Eurozone nations - the sign of a 1997-type Asian Contagion. What the Germans and French do next will determine if the Euro falls off the cliff.  Germany would like nothing more than jettison Greece from the zone. Of course this is not possible since it will worsen the contagion and take down Germany with it.  The problem with economic integration is that there is no such thing. Without being able to directly intervene in a member country's fiscal policy, there is nothing Brussels can do to impose the kind of discipline needed to maintain the value of the currency.  In the U.S., if states like California and New York do not begin to seriously impose Wisconsin and New Jersey-type fiscal discipline (by rewriting public labor contracts and reining in taxes), we will have our own Greek crisis.