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By The ETF Professor, Benzinga Staff Writer

Traders are wondering what European shoe will be the next to drop and we are not talking about Christian Louboutins or Pradas. We're talking eurozone members and all eyes appear to be on Italy as the next European problem child to need some form of financial assistance, also known as a bailout.

Mired in a recession, Italy has one of the highest debt to GDP ratios in the developed world. That metric could top 129% this year and Citigroup has said Italy's debt/GDP could reach 137% in 2014. Not to mention, as the eurozone's third-largest economy, financial assistance for Italy would be a daunting task, perhaps one that can't be fulfilled.

Italian banks, while not quite in the dire straits as their Spanish counterparts, are not in the best of health and it has been speculated excess capital or lack thereof is an issue in the Italian financial system. That might be one reason why yields on 10-year Italian sovereigns were around 5.83% on Monday. The OECD forecast that Italy's economy will shrink 1.7% this year is almost certainly another reason Italian bond yields remain high and investor skepticism about Italy continues to be elevated.

For ETF investors, there is more than just the iShares MSCI Italy Index Fund (NYSEARCA:EWI) to keep an eye. These other ETFs could be sensitive to glum news out of Italy going forward. Some members of the list may be surprises.

Global X FTSE Argentina 20 ETF (NYSEARCA:ARGT) This one may come as a surprise to some folks, but this is why the Global X FTSE Argentina 20 ETF makes a list involving Italy: ARGT allocates about 14% of its weight to bank stocks. That's not the problem. What is the problem is that some Argentine banks are heavily exposed to European sovereign debt.

Several European Union countries, including Italy, enjoy trading partnerships with Argentina, but there is speculation those relationships have become strained in the wake of the Argentine government nationalizing YPF S.A. (NYSE:YPF). That move has hurt Argentina with key economic partners and cast a black cloud over ARGT.

PowerShares S&P International Developed High Beta Portfolio (NYSEARCA:IDHB) The PowerShares S&P International Developed High Beta Portfolio, which debuted in February, lives up to its name and doesn't skimp on beta or exposure to controversial European nations. While stodgy Sweden represents almost 18% of IDHB's weight, five eurozone members combine for about 40% of the fund's weight, including a 10.3% allocation to Italy. Again, IDHB isn't for the faint of heart as it devotes almost a third of its weight to bank stocks.

PowerShares DB Italian Treasury Bond Futures ETN (NYSEARCA:ITLY) ITLY tracks the DB USD BTP Futures index, which features securities with an original term of no longer than 16 years and remaining term to maturity of not less than 8 years and 6 months. The ETN has a leveraged cousin in the form of the PowerShares DB 3x Italian Treasury Bond Futures ETN (NYSEARCA:ITLT).

As one might imagine, owning ITLY and ITLT hasn't been good for a portfolio's health recently. The fund's are down 5.8% and 16.5%, respectively, in the past three months.

WisdomTree Europe SmallCap Dividend Fund (NYSEARCA:DFE) In a more sanguine market environment, the WisdomTree Europe SmallCap Dividend Fund would be an ETF plenty of folks would want to cozy up to. The combination of global stocks, dividends and small-caps under one umbrella is compelling, but a deeper look at this fund leaves one thinking "not now, maybe later."

Industrial, consumer discretionary and financial services names combine for about 62% of DFE's weight and those are sectors to be avoided amid Europe's backdrop of slowing growth. As if that's not bad enough, all of the PIIGS except Greece are represented in DFE. Italy leads the way with a weight of 8.8%. No wonder this ETF is down almost 12% in the past three months.

Disclaimer: Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Source: Italy ETFs: The Next Dominoes To Fall?