On January 15, European Central Bank President Jean-Claude Trichet was asked if Greece posed a threat to the monetary union. He replied that the crisis in Greece was greatly overstated. But he also said something else very alarming. He told reporters that if they wanted to worry about something, they should worry aboutCalifornia. While the world is focusing on a small country of 10 million in Europe, could an even more dangerous situation be developing in America?

Right now, Greece is synonymous with an economic red alert. Without a bailout, the entire country could face debt default. A very deep recession is on its way, and standards of living are plummeting. Unions are already staging mass strikes, and money is fleeing the country as those who have cash park it in foreign locales. Some analysts think the crisis in Greece could lead to the disintegration or the revamping of the eurozone.

You think Greece, you think of an economy burning down. But is it possible that California could actually be in a more dangerous situation?

Some people say yes. So much so that California is becoming a popular analogy to the failing Mediterranean nation.

On February 16, Luxembourg Prime Minister Jean-Claude Juncker was fielding questions about the crisis in Greece. When asked if the International Monetary Fund would bail out the country, he quipped back that to talk of a loan from the imf was “absurd” for a country using the euro.

He then indignantly said: “If California has a refinancing problem the U.S. wouldn’t go to the imf. Why should we go as a euro area to the imf if we have resources by our own to solve the problem?”

Like Greece, California is becoming a symbol for budget problems. And the fact that California—the seventh-largest economy in the world—is frequently mentioned in the same breath as Greece is a testament to how far the Golden State has fallen (as is the fact that California was already forced to temporarily send out iou’s to pay its bills last year).

How could California set off a Greek-style economic crisis in America?

In some ways, Greece and California are very similar. Both have high unemployment and falling tax receipts. Both also have bloated public sectors with lavish retirement and pension plans that are underfunded and unsustainable. Both have gridlocked governments comprised of politicians incapable of working together to make hard choices.

Greece and California are also members of a larger union that shares a common currency. Each state also has specific trade relationships as well as financial interrelations with others inside the union. And both states have the worst credit ratings within their unions. Like Greece, it costs more to insure California debt against default than it does to insure Kazakhstan.

Greece and California have other similarities. Both states are dominated by special interest groups and handicapped by unions. Chronic overspending has become endemic and uncontrollable in both locales.

“Lastly,” as Agora Financial’s Bill Jenkins notes, “each is ‘bankrupt,’ and that has a certain dilatory effect on those around it.”

Critics of the economic doomsaying point out that there are big differences between Greece and California. There are differences, but not all of them are good.

In some ways, California could actually be a greater threat to its union.

California’s debt is supposedly far less than that of Greece. California’s debt reportedly equals approximately 7 percent of its economy. In Greece, the ratio is around 100 percent. On the surface, Greece looks much worse off.

In reality, comparing total California debt to total Greece debt is like comparing rotten apples to rotten oranges. To make it a fair comparison, you also need to factor in California’s share of the national debt (which is projected to be $14 trillion by year end). When this amount is factored in, the $68 billion that the state owes (as of the end of 2009) balloons to $1.65 trillion—which means that California’s actual debt-to-gdp ratio is almost 90 percent.

Yet, as horrendous as a debt-to-economy ratio of 90 percent is, California’s ratio is even greater. When including unfunded Social Security, Medicare and Medicaid liabilities into the equation, California’s state debt-to-gdp ratio soars to a stratospheric 400 percent.

That means California debt equals more than $200,000 per man, woman and child. Where is the money going to come from?

A California debt default would be far more damaging to the U.S. than anything that a Greek failure could produce. Besides being far smaller, Greece’s economy only makes up 3 percent of the total eurozone. California, however, composes about 12 percent of the U.S. economy.

Plus, a California default could hurt many U.S. states disproportionately hard. According to Trichet, cumulative U.S. state budget deficits amount to 12 percent of America’s gross domestic product. In Europe, the figure is only 7 percent.

Portugal may be a problem. But so is Ohio. Think things are tough in Ireland? Look at Kentucky. Is Spain having unemployment issues? So are Florida, Illinois and Michigan. While analysts focus on Greece, they are missing the rhinoceros in the flower garden.

David Walker is the former U.S. comptroller general—which means he was America’s top auditor. According to Walker, America only has a couple of years to deal with its deficit problems before it ends up like Greece. America could face a “crisis of confidence with regard to our own finances” if we don’t start being honest with our budgets, he says. Walker, who is now working to bring attention to America’s financial irresponsibility, warns that a big part of America’s problem is its use of “creative accounting practices”—the same ones that burned Greece.

Events in Europe surrounding Greece are pivotal, and could have dramatic economic and geopolitical ramifications (you can read articles here and here). But when comparing Greece and California, don’t forget that California’s economy is five times larger. The EU could survive without Greece, but America will not survive without California.

Unfortunately for California and the rest of America, the Greece crisis is all too familiar—it is kind of like looking in a mirror.