It s a fact often overlooked, but the first shot of World War I was fired in the Balkans. The next salvos followed an obscure series of historical events. Those headlines seemed disjointed at the time, but they led to scouring conflagration of the civilized world that upended the established alignments of nations and powers.

What s happened in Greece, whose sovereign credit rating was dropped this week by Fitch Ratings to BBB+ from single-A-minus, may not have such far-reaching consequences, but it s surely rattled the complacency of bulls looking for an economic revival from abroad.

There are many issues at play, many of which will remain obscure to most American investors but are still pretty important. The slashed debt rating is likely to trigger higher sovereign borrowing costs. That increase could widen the fissures in the 16-member eurozone, whose currency is high relative to the dollar and whose relative stability has been a benchmark of success during the global recovery.

Now, Greece, an economically weak member of the eurozone, threatens to test a host of European Union and European Commission rules that are the bulwark of what makes the unified currency work.

When the euro was being launched, the eurozone s members bent and stretched their own rules on the ratio of budget deficit to gross domestic product in order to bring the currency to life and retain all of its members. This was particularly difficult during the economic weakness of the late '90s. But the understanding was that as long as the stronger economies in the zone remained stable, the euro would be a viable currency.

The recession is testing that philosophy. Take Ireland, for instance. The country blew past the 3% ratio in the spring and has since embarked on a set of austerity measures which kept its deficit going to a worst-case 13.5% of its GDP by next year.

Robert Brusca, head of Fact and Opinion Research, says even the strongest eurozone economies are weaker than they appear. He said France, the perennial No. 2 to Germany, will need until 2013 to get its finances in order to meet the strictest criteria of the Maastricht Treaty, the 1992 pact that created the European Union.

When you look at the eurozone, there are a lot of troubled countries, Brusca says. If there s one thing that s positive, it s fortunate for Greece to be in the eurozone so the drachma doesn t get pounded in the foreign currency markets.

That may be a small consolation, and perhaps a short-lived one with Greece, says Charlie Gushee, head of Western European equity sales at institutional brokerage Auerbach Grayson. If Greece can t get its financial house in order no small feat under a 12.7 ratio of deficit to GDP, a plunging stock market and a new socialist government that will have trouble cutting back on things like wage increases for public employees the Continent will be entering new territory.

If one euro country blows out, it's untested territory for all of Europe and how they handle it, Gushee says. The [euro] system was not designed to have that happen. It was designed to have countries take the pain with penalties and so forth until they did what they needed to do to stay in the currency union.

The idea of a buckling eurozone has perennial bear David Rosenberg, chief investment strategist at Gluskin Sheff, particularly concerned. All of a sudden, the world doesn t seem like that much of a safe place, he wrote in a Wednesday research note. He called Dubai and Greece prime examples of risk that did not go away and that no amount of global liquidity [such as massive government spending] can disguise unsound leveraged financial decisions indefinitely.

In fact, the weaker half of the eurozone is now, from a global investor s standpoint, something like PIIGS in a poke. PIIGS -- an acronym for Portugal, Ireland, Italy, Greece and Spain, the weakest economies in the 16-member currency union -- is quickly becoming a negative counterweight to the BRIC play, aggressive emerging market investments in Brazil, Russia, India and China.

The question for Europe now is how much more solvent are countries like Italy, Portugal and Spain, Rosenberg said. Could it be that these are the regions where the next financial shoe is going to drop? Does the Continent have the balance sheet that the U.S. does to absorb the losses and guarantee the liabilities?

Greece clearly does not, says ISI Group international economist Nancy Lazar. Last week, she said survey data on Greece paint an ugly picture. Deficits are the norm, down to the household, where consumer spending is at 70% of GDP -- a U.S.- like level, and well above the eurozone average of 58%. That s making it hard to insure Greek risk, and driving up the cost of credit default swaps, something sophisticated investors use to assess overall financial health.

The Greek stock market had one of the largest declines, and has had the smallest rally during the past crisis and recovery, she wrote. And recently it has declined again and has been underperforming emerging market stocks for almost a decade.

Gushee says the National Bank of Greece has dipped more than 25%, and it s a good proxy for the rest of the market.

With that in mind, Greece remains a lovely place to visit but a dismal place to invest.