Montreal, Canada

Increasingly, the resultant damage caused by the sovereign bond crisis in Greece implies a two-tier bond market is developing as investors scrutinize among countries. The only safe-havens now in bonds are German and Dutch paper – considered first-tier bond markets.

Greece, with junk bond credit at this point and likely to be joined by Portugal, Ireland and Spain, are considered riskier speculations than the core eurozone bond markets of Germany, the Netherlands and France. Italy, Belgium and Austria probably fall somewhere in the middle – not too junky but not too AAA either or coined second-tier markets. Smaller EMU nations like Finland, Slovenia, Slovakia and Luxembourg probably fall in the second-tier just below Germany and Holland but ahead of Italy, Belgium and Austria.

Despite using the same currency, the EUR, monetary union is not a fiscal union. And therein lies the heart of this year's historical breakdown of a coherent bond market. Investors have decided that Greece deserves a high risk premium to German debt while spreads on Spanish, Portuguese and Irish sovereign bonds remain elevated as fears continue to rise amid a deteriorating regional economy driven by rigid spending cuts at the worst possible time.

Many investors are predicting the eventual demise of the EUR as heavily debt-burdened countries relent to the forces of local political and economic pressure and opt to leave the eurozone; interest rates for those defecting will be significantly higher than currently enjoyed under the German umbrella.

The nadir of this crisis has not yet been played out by any means. More trouble lies ahead as other eurozone markets are attacked by speculators. Is France next?

I'm not sure France deserves to be in the "core" eurozone as it pertains to AAA credit-worthiness. Only Germany and Holland deserve this designation. The French, to be sure, have recently introduced a series of spending cuts and tax hikes to appease their German political entente but at what price to monetary union? Can the French handle austerity?

The French harbor a rising trade deficit and a bulging budget deficit. These twin deficits are hard to control. Riots have already begun in Paris to protest against spending cuts – the same civil discord that's still widespread in many parts of Greece. I suspect civil chaos will increase in other economically challenged eurozone countries, including Spain and Portugal. The Irish, however, have thus far swallowed their fiscal medicine with barely any civil disorder.

Defaults might be the next shoe to drop. Greece will be first, followed by a few others on the periphery. I also wouldn't be surprised to see Europe's weakest economies – Bulgaria and Romania – take big hits unless an IMF rescue is orchestrated quickly. Both countries are borderline insolvent. Ukraine and Hungary have avoided the default route thus far but I highly doubt they'll be able to escape a debt restructuring beyond the next 36 months if economic hardship accelerates in the region.

Once we digest these and perhaps several other sovereign defaults, be prepared for more European banking problems. Germany and France have massive loan obligations throughout the Club Med region of southern Europe and a restructuring of debt terms will definitely harm their already questionable balance sheets. Other countries will suffer the same fate.

What we're witnessing now before our very eyes is the ongoing struggle between the European Central Bank and The Bank of England versus global speculators – and the latter continues to make inroads. Europe is losing the war on financial credibility. This is what a sovereign debt crisis implies.