The Republic of Ireland's €85bn (£72bn) bailout has failed to end the crisis of confidence gripping the eurozone, and may even have exacerbated it.
Far from being immunised against the "contagion", other economies are now coming under renewed attack. Most worryingly, since the Irish deal investors have started to dump Italian government debt even as the sell-off of Greek, Irish, Spanish, Belgian and Portuguese securities continues – a broad vote of no confidence from the markets to European Union leaders.
Talk of discounts for bond-holders, for debt issued after 2013, and the sheer unaffordability of some of the rescue deals implemented and in imminent prospect have spooked many. The European Central Bank's president, Jean-Claude Trichet, tried to reassure markets by saying current bond-holders were secure, in line with precedents set by the International Monetary Fund (IMF) in dealing with other sovereign defaults.
"In stating very explicitly that Europe will be 'fully consistent with IMF policy' and 'IMF practices' as regards private sector involvement, the position made public by governments last Sunday is a useful clarification," Mr Trichet told the European Parliament.
During trading yesterday, the euro fell by a substantial 1 per cent to sink below the €1.30 level against the dollar. The single currency has depreciated by 6.5 per cent in a little more than a week – a dramatic decline. The cost of insuring Spanish, Italian, Irish and Portuguese government bonds against default rose to fresh highs, with the "risk premium" demanded by investors to hold Italian rather than equivalent German government bonds hitting 200 basis points, the highest since 1997, before the euro.
Mohamed el-Erian, of Pimco, a leading investor in sovereign debt, said: "My concern is that indecisive management of problems in Greece and Ireland might lead investors to sell sovereign bonds issued by peripheral eurozone states as a preventive measure. That would increase refinancing costs and problems in those countries.
"The longer the uncertainty over how investors will participate in losses lasts, the greater the probability that they withdraw from the market."
That withdrawal appears to be gathering pace. The yield on 10-year Spanish bonds increased for an 11th successive trading day, climbing nine basis points to 5.55 per cent, after a 25 basis-point jump on Tuesday – 282 basis points ahead of the German equivalent. Many economists view a yield of 6.5 per cent on the benchmark 10-year Spanish bonds as the tipping point that would push the country into an unsustainable financing cycle.
Markets were also beginning to price in a second Greek crisis, as they digested the news that the payback by Athens of the €110bn in loans granted in May would be extended from 2015 to 2024. Nouriel Roubini, the economist credited with predicting the credit crunch, has said that a Portuguese bailout is now near-certain. Belgium is also at risk.
But it is Spain, and increasingly Italy, that is really causing anxiety. Most observers, including Dr Roubini, argue that Spain would probably bring the EU/IMF €770bn rescue fund to breaking-point. Italy, the third largest economy in the euro area, really would be "too big to save".