On Tuesday, Fitch Ratings downgraded Greece's credit rating to a BBB plus with a negative outlook. This is undeniably bad for Greece but, as commentators were quick to point out, the crisis also threatens aftershocks in the European Union. Greece's plunging credit rating could prompt the European Union to circumvent its own regulations to save the country from bankruptcy, or Athens may declare insolvency. Some observers fear that Greek bankruptcy could gravely wound the euro. Here's what the possible calamity could mean for the E.U.:

• E.U. Going to Take a Stand Edward Hugh at A Fistful of Euros thinks the E.U. authorities echoes the point that "more than the credibility of the Greek government ... what is being tested is the credibility of the European Union's institutional structure." He thinks the E.U. officials are well aware of that, and loathe to encourage "reckless" behavior through rescuing Greece at this point. "I have little doubt," writes Hugh, "that it is in Greece that a stand will now be taken." It is always possible, he notes, that the country will turn, instead, to the IMF.
  

• Either Way: Lesson About New Members John Ogg at 24/7 Wall St. points out the obvious: this situation "outlines some of the risks that the larger European Union members are taking on with each new less developed nation added to the E.U."

• Greece May Well Declare Insolvency Der Spiegel's Wolfgang Reuter writes that "Greece has already accumulated a mountain of debt that will be difficult if not impossible to pay off." But "if investors lose confidence in the bonds, a meltdown could happen as early as next year." In such a meltdown, the Greek government would "be required to refinance ... that is, repay what they owe using funds borrowed from the financial markets. But if no buyers can be found for its securities, Greece will have no choice but to declare insolvency." E.U. rules, furthermore, forbid the group from lending money to help the Greek deficit.
  

• E.U. Choice: Moral Hazard vs. Domino Effect Megan McArdle points out, as do many, the "moral hazard" in helping Greece with its debt, entirely separate from legal considerations: "investors are betting that other investors will bail Greece out rather than risk damaging the euro." On the other hand, if Greece declares bankruptcy, writes McArdle, "it's probable that speculators will start eyeing other eurozone members," whose banks are "heavily invested in Greek bonds."

• What Greek Insolvency Would Do to the Euro and E.U. As McArdle notes, investors are banking on the E.U.'s interest in protecting the euro. How would Greek insolvency affect the euro? "Confidence in the euro would be shattered," explains Reuters, "and the union would face a crucial test. What good is a common currency, many would ask, if some of the member states pay their debts while others do not?" Reuter also reports the possibility that the Greek government, like many a government in a similar situation, would attempt to print money to pay off the debt. But that, too, is forbidden by E.U. rules, and Reuter says no one's entirely sure what would happen were Greece to start printing euros without authorization.

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Heather Horn