When Ireland finally decided this weekend to accept a bailout, the hope was that it would relieve pressure on other indebted euro-zone governments. But that hope looked naive today as investors sold off stock and bonds in Portugal and Spain, which analysts say are next in line for a bailout. Comments this morning from German Chancellor Angela Merkel — who said that Ireland's crisis was "very worrying" and that the E.U. is in "an extraordinarily serious situation as far as the situation of the euro is concerned" — ended up spurring more sell-offs. In an op-ed, business-school professor Geoffrey Wood also sounded skeptical about the fate of the euro:
If Portugal or even Spain may need a bailout, the burden on the euro zone's economic center, Germany, will increase further. How long will it be able to bear it? And how long will it be willing to do so? At some point the markets will question the stability of the whole euro project. These doubts can be addressed in one of two ways. Either the union will end (or contract to a core) or there will be sudden political and fiscal centralization. Which is more likely?
And we were so hoping to leave the phrase "global financial contagion" back where we found it: in 2007.