In a recent tax probe, it was found that ex-CEO of UniCredit SpA (BIT:UCG), Alessandro Profumo is among 20 other bankers and portfolio managers in Italy’s biggest lender and the British investment bank, Barclays PLC (ADR) (NYSE:BCS) that have been linked to an investment plan called “Brontos”.

According to the reports, Brontos was used by UniCredit to evade taxes and the plan was created by Barclays.  The way Brontos worked was that interest on a checking account was paid for by dividends of securities that did not exist.

UniCredit denies that is conducted any tax evasion practices.  The Italian lender says that the company and its employees “acted with transparency and in good faith” and went on to say that they believe they will be cleared in court.

Barclays was the mastermind behind the tax evasion plans, however, they maintain that they did not break any laws.  Barclays had used a Luxembourg based unit to issue Turkish-lira securities that were later purchased by the investment bank’s Milan branch.

Unfortunately, Italy is out of some tax dollars but no doubt will be retrieving their share in taxes if the bankers are found guilty in court.

This is yet another blow to investor confidence in Europe.  European officials are having a hard time containing the wild fire that is spread very quickly and vastly.  We continuously await any signs that the ECB or some sort of governing body in Europe has a plan or at least a temporary fix to the bleeding from Spain, Italy and Greece.

To make matters worse, the S&P currently sees a 1-in-3 chance that Greece will exit the Euro in the short term.  Basically, the S&P is saying there is a 33% chance that Greece will exit the Euro this summer and you can bet that markets around the world will be hit hard by a Greek exit.

Much like in the US during 2008, progress is slow and not all that significant.  It will take time before Europe is able to stop the bleeding first, then apply a more long term solution to the problem.

The bottom line is that Europe is a mess right now.  We have bankers been charged with tax fraud, Greece possibly exiting the Euro, weak data from Spain and Italy, etc.  It is a tough environment out there that definitely is weighing down on US markets and will continue to do so until the Europeans find a solution.