The euro plunged further into crisis yesterday as investors sold off Spanish, Portuguese and Belgian government bonds in record numbers on renewed fears that those nations would follow Greece and Ireland into the financial emergency ward, undermining confidence in the single currency.
The spreading contagion suggests that the markets now view the break-up of the euro as a realistic possibility, and that "shock and awe" efforts to shore up individual economies with huge bailouts have not succeeded in insulating their neighbours from infection. Spain, in particular, is regarded as being "too big to save". Should Spain eventually need assistance it would also imply a much larger UK bilateral loan than the £8bn offered to Ireland – perhaps £20bn or £30bn.
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