Everyone is now talking about Portugal which has bowed to the inevitable and asked for an EU bailout. Any bailout eases concern about an immediate default but it's no solution. The money will be a loan so that doesn't solve the issue of solvency.
But Dr Doom, economist Nouriel Roubini who foreshadowed the global financial crisis says that Portugal is small beer. The big worry, he says, is Spain. "I think the big question is not Portugal – that is too small – but rather whether the contagion could spread, over time, to Spain, a country that is on one side too big to fail, but from the other side too big to be saved," Roubini says.
Unemployment in Spain is now at 20.1% but Spain's economy minister Elena Salgado has ruled out a bailout for Spain. But then, they would say that. Spain is the one to watch and if Spain, one of Europe's biggest economies, gets a bailout, the contagion will spread.
So what are the global implications?
The US is going down a similar route. The moderate economic growth forecast by most economists and the US Federal Reserve will actually fail to generate the tax revenue the country needs to fund long-running government spending. As with Europe, the US is going to run out of money.
John E Sylvia, chief economist at Wells Fargo puts it well. "To me – being in Europe for a few days – the plot in Greece and Portugal sounds an awful lot like the same plot that's going on in the United States. But the characters have different names."
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