Is This The Beginning Of A Horrifying Stock Market Crash In Europe?Michael Snyder, Contributor Allegedly, there were some very large unreported derivatives deals that were supposed to help hide losses at the bank, but instead they actually made the losses much larger. The investigation that is looking into this derivatives scandal is starting to spread to other banks, and nobody is quite sure how far down the rabbit hole this thing goes. But what everyone does agree on is that this derivatives scandal has shaken up Italian politics, and the outcome of the upcoming election is now very uncertain. Former Prime Minister Silvio Berlusconi is rapidly rising in the polls, and the European establishment is less than thrilled about that. Meanwhile, stock indexes all over Europe fell rapidly on Monday, and even the Dow was down 129 points. So will all this blow over in a few days, or is this the beginning of a full-blown stock market crash in Europe? That is a very good question. Perhaps there would not be so much concern if the overall European economy was doing well, but the truth is that the underlying economic fundamentals in Europe have continued to get even worse. The unemployment rate in the eurozone is at an all-time high, and the unemployment rates in both Greece and Spain are now over 26 percent. Much of southern Europe is already in the midst of a full-blown economic depression, so it really has been remarkable that the financial markets in Europe have been able to hold up as well as they have so far. National benchmark indexes declined in all of the 18 western European markets, except Greece and Denmark. Italys FTSE MIB Index (FTSEMIB) sank 4.5 percent, the most in six months. Spains IBEX 35 slid 3.8 percent for a sixth day of declines, the longest losing streak in 10 months. Frances CAC 40 plunged 3 percent for the biggest drop since April. The U.K.s FTSE 100 dropped 1.6 percent and Germanys DAX lost 2.5 percent. Unfortunately, what happened on Monday was just the continuation of a trend that started last week. The following is from Zero Hedge The last four days have seen the biggest plunge in over six months with the IBEX (Spain -5.7%) and Italys MIB -6.7%. At the same time, Europes seemingly invincible OMT-promise-protected sovereign bond market has started to underwhelm. Italian bond spreads are 32bps wider and Spain 28bps wider the biggest increase in risk in two months. European banks have been hit particularly hard during this recent downturn. Just check out some of the huge declines that European banking stocks experienced on Monday UniCredit SpA: -8.3 percent Those are huge moves for just a single day of trading. If we have a couple of more days like that, everyone is going to be talking about a stock market crash in Europe. Unfortunately, it does not appear that any solutions to the scandals that are shaking up southern Europe right now will be forthcoming any time soon. In Spain, it is increasingly looking like the Prime Minister may actually have to resign. A recentCNN article explained what the scandal is all about Rajoy denied on Saturday allegations that he and other leaders of his conservative Peoples Party had received secret cash payments from a fund operated by the partys former treasurer. Rajoy said he would publish details of his personal wealth and income tax states on the prime ministers website. Of course politicians all over the world are accused of doing evil things all the time, but in this instance it appears that there may be some solid evidence that Rajoy may not be able to deny. The following comes from aBloomberg report Newspaper El Pais last week published allegations of illegal cash payments, featuring extracts from handwritten ledgers by the former Peoples Party Treasurer Luis Barcenas showing payments to officials including Rajoy. At this point, opinion polls are showing that even most of his own supporters do not believe him Polls show that 60pc of his own supporters do not believe the official explanation. A national petition drive calling for his resignation has already collected almost 800,000 signatures. Socialist opposition leader Alfredo Prez Rubalcaba yesterday joined the chorus calling for Mr Rajoys head, saying the country had become ungovernable. So definitely expect things in Spain to get worse before they get better. Meanwhile, the derivatives scandal in Italy continues to get more interesting. Italys third largest bank is on the brink of collapse due to huge problems with derivatives contracts, and that bank just happens to be closely linked with the Italian politicianthat is currently leading in the polls The Italian scandal is related to Italys third-biggest bank, Monte dei Paschi di Siena, which has received two government bailouts and may yet have to be nationalized as its losses mount. The bank is closely associated to Italys Democratic Party, whose leader, Pier Luigi Bersani, is leading in the polls, though slipping from his highs as former prime minister Silvio Berlusconi makes a late surge before the Feb. 25th general election. The Monte [banking] scandals now look like overwhelming the Italian election campaign and put [Mr.] Bersani and the Democratic Partys victory at risk, James Walston, political commentator at the American University of Rome, said in his Monday blog. The Monte scandal centres on allegedly unreported derivatives deals that were apparently designed to hide losses and instead made the losses deeper. The bank, now under new management, has admitted that the derivatives losses might total more than 700-million. So who benefits from all of this? Well, it turns out that as a result of this scandal former Prime Minister Silvio Berlusconi is rapidly gaining more support. The following is from a recent Telegraph article In Italy, ex-premier Silvio Berlusconi has upset the political landscape just three weeks before elections, surging back into contention with vows to rip up German-imposed austerity policies and cancel a hated property tax. His Right-wing alliance has risen to 28pc in the polls, relishing a widening scandal at Banca Monte dei Paschi that has embroiled the Italian left. But even if none of these scandals had happened, it was inevitable that the gigantic debt bubble in Europe would end up bursting at some point. So our credit-based financial markets and the economy it supports are levered, fragile and increasingly entropic it is running out of energy and time. When does money run out of time? The countdown begins when investable assets pose too much risk for too little return; when lenders desert credit markets for other alternatives such as cash or real assets. No debt bubble can expand indefinitely. At some point it can no longer hold itself together. So how much time do we have left? Feel free to share your thoughts on that question by posting a comment below This article first appeared here at the American Dream. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here. linkwithin_text=Related Articles: 