Sean O'Grady: A bailout is on the way, if the markets are to be believed

When it comes to bewildering financial crises it is usually best to start with the crisp wisdom of Nouriel Roubini, the man who called the credit crunch right. Mr Roubini said this week, bluntly, that Ireland is "on a path to near or complete insolvency". In response, Irish ministers bleat that "we're fully funded until mid-2011". Big deal. If you'd lent someone money to buy a house and they'd said that they were OK for cash until next summer, but after that things might get a bit hairy, how reassured would you be?

So that is why the big powers in the European Union are determined to bail Ireland out sooner rather than later. The experts flying to Dublin are going to be there for longer than one of the famous weekend breaks that can be so enjoyably spent in the friendly bars of the capital, but they will be expected to get on with things and avoid the Guinness. Christine Lagarde, the French Finance Minister, gave them "a matter of days". The fact that the euro and Irish government bonds are stabilising suggests that the markets also expect this to be sorted out rapidly, and that Ireland will get its bailout whether it wants it or not.

George Osborne is right to chip in the £8bn or so that is the UK's share of the bailout (or "bank restructuring plan", as we may have to term it). We cannot risk another meltdown of consumer and business confidence on the scale of the ones that followed the Greek crisis in May.

If households and businesses across Europe slash their spending and investment plans again, then what recovery we have seen will be in jeopardy. For it bears repeating that the European Union is our largest trading partner by far, a vital source of investment and with a financial system intimately linked to ours.

The British banks have big exposures to Ireland. So do others across Europe. If they suffer more bad debts and losses the effects will be felt right across the continent, just as they were with Greece. And if the contagion spreads to Portugal and, even worse, Spain then the euro itself could be destroyed.

Ireland may be salvageable, but at a surprisingly colossal cost of €80bn to €100bn, a big chunk of the €750bn rescue fund, and a big bill for such a little nation.