FEAR was spreading across Europe today that Ireland's €85bn rescue package is not enough to prevent further bailouts.
Belgium has now been dragged into the danger zone alongside Portugal, Spain and Italy who were hit by increased bond yields yesterday.
Markets gave a generally negative response to the IMF/ECB deal here as contagion continued unabated. The euro fell to its lowest level for two months against the dollar, while Italy and Spain bond yields saw their biggest one-day increase in more than a decade.
Asian markets also closed almost 2pc lower today as fears mounted that Portugal will be the next country to need a significant bailout.
“The Irish bailout package doesn't seem to have made any difference. Previous bailouts have stopped the next problem for at least a couple of months,” said Jim Reid, credit strategist at Deutsche Bank.
The deal did provide some respite for the Irish markets with battered bank shares continuing to climb this morning.
Irish Life and Permanent was up another 3.8pc in early trading, while Bank of Ireland jumped 2.61pc.
AIB did show a small retraction on the significant gains it made yesterday. And the interest rate demanded by investors for Irish Government 10-year bonds was still rising this morning and remained well above 9pc.
As the crisis continued, British newspapers were warning their taxpayers that the €6bn they provided for Ireland could pale in comparison if they are forced to “pour even more cash into a rescue deal for failing European nations”.
Experts are now suggesting that Portugal could require a bailout in the region of €50bn.
The problem is being fuelled by the suspicion that European countries will be allowed to burn senior bondholders in the future.
During negotiations about the Irish package, the European Central Bank ruled out the possibility of defaulting on the cash owed by banks to some investors. It is understood that the Government did broach the idea of making them share the pain but Europe feared the consequences for other countries.
Governor of the Central Bank Patrick Honohan has confirmed that the Irish negotiators agreed not to sanction the bondholders in exchange for the ECB maintaining “a liberal attitude” to supporting the Irish financial system.
“There is a liberal attitude being demonstrated by the ECB in regard to the funding of Irish banks, and it continues and will continue while confidence is being restored to underpin the Irish banking system,” he said.
The Government's recovery strategy suffered a serious blow last night when the EU Commission released its growth predictions for 2011. In his four-year plan published last week, Finance Minister Brian Lenihan said that growth would be around 1.75pc but the commission has suggested it will be just 0.9pc. They also cut the Government's projects for 2012 from 3.2pc to 1.9pc.