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The euro sank to its lowest in the 2 months against the dollar fell below $1.34 sometime in the afternoon trade. The single currency fell by 2 cents to $1.342 at 3.50 pm.

Irish, Portuguese and Spanish Government bonds are also in the line of fire.

Yield - the rate of return earned by investors - obligations of Government 10-year reference is passed to 8 024pc of 7 869pc lundi.Sur Portuguese bond yield moved to 6 636pc of 6 523pc.

While the difference between yields on 10-year bonds Spanish and German lifted - another sign fears of investors - pink 223 basis points, the highest since a Summit euro-ère hit in June.

The Spain is responsible for large concern EU because it represents the Ireland of economy of the euro area, unlike the Greece 10pc and Portugal, which account for less than 2pc each.

FTSE 100 index of key actions London fell 1pc - or 58 points-5621 as European and global growth fears weigh on mining stocks.

Major stock markets and Germany France found 0. 8pc and 1. 6pc respectivement.Pendant this time Dublin Bank shares collapsed, losing ground even more than the coalition Government has imploded, compromising the prospective EU - IMF rescue.

"As if all European sovereignty issues were not enough, and they are, the markets were more résonnés as North Korea with impeccable timing, decided to show that its military might," said Jennifer Lee, an analyst at BMO group financial.

Two models for failure

A problem in the euro area is it is now two models for failure even Greece, Government mishandling economy infiltrated into the banking system and he outside markets.With the banking crisis, the Ireland overwhelmed which was also an economy that works.

Brussels insisted on Monday that the Portugal is "a totally different situation" in Irlande.Cependant, position of the Portugal is unfortunately not that different to the Greece.The Spain analogy is Irlande.Que the sovereign or the banking system is in crisis, there are now précédent.Et markets are once more surprising.

"It clearly the Greece was not an isolated case and European authorities are concerned with the contagion," said Simon Derrick, head of the currency at the Bank of New York Mellon."Interpretation of their behaviour, is that there is more risk there."

The greatest risk is the Portugal.Dette public sector, approximately 80pc of GDP, is not in itself a problem, but combined with a 9 3pc deficit which is unchanged despite some fiscal austerity in early (a VAT increase and spending cuts), it is easy to evoke fears of sovereign debt trap.

Worse still is the level of debt from the private sector, foreign investors PIB.Les 240pc relies on 40pc of bank financing and concerns about the economy were already "close Portuguese banks out of the markets" by Giada Giani, European Economist at Citi.

"This is a question about pricing and availability of credit", she added.Taking into account the extent of the debt to the private sector, a significant increase in rates caused by the Portuguese borrowing perceived economic contingencies could result in slower than the 0 2pc already anemic growth anticipated next year.

The Portugal minority Government pushes that remain fresh austerity measures to reduce the budget deficit by four percentage points but the questions about his credibility.

The Spain Irish problem

Problems the Spain echo Ireland .the banks the Ireland have five times the size of the active nationale.Banque the Spain economy assets are three times more grandes.Tous both suffered debilitating property bubble caused asset prices collapse.

However, Spain, has a stronger regulatory body and that half of its banking assets are held by the risky "cajas" or regional banks.

To date, Bank recapitalizations have cost 1pc Spanish Government of GDP, compared to the 20pc in Irlande.Mme Giani said "there is more bad news to come".Seulement €with a jar of recapitalisation raise € has been drawn up to now.

As the Ireland Spain, finances do not were in a mess until the crisis has public frappé.Dette provides only 65pc of GDP this year and 9 3pc deficit must be reduced by five points percentage under a regime of austerity.

Great fear, however, is that the cajas release a new storm on the Ireland publiques.Pour finance, Bank bail pushed 12pc budget deficit at 32pc .c ' is a rescue operation too far.

Market currencies were also concerned that speculation that China will raise interest to curb rampant inflation, injuring an already faltering global recovery rates.

While Korea North and South Korea exchanged fire Tuesday, adding to the geopolitical uncertainty,

A strengthening dollar hit the price of gold.

"Or is likely to be remained in the near future, with $1 340 is a good level of soutien.Les perspectives are still strong, the European debt situation is not very optimistic, said the trader based Singapore.".

Uncertainty in Europe and the far East affected stock markets in Asia, with China Shanghai low index of 2pc.

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Spain Bank Governor Miguel Angel Fernandez Ordonez: "perspectives for a gradual recovery are surrounded by uncertainty."

Cost of borrowing country soared this year as investors worried that its deficit high - hangover property crisis which has not yet fully relax - could push the way of Greek and Irish debt crises, put a huge strain on bailout of EU resources.

"The prospects for a gradual recovery are surrounded by uncertainty," Bank of Spain Governor Miguel Angel Fernandez Ordonez said senators.

"In an environment where predictable financing conditions remain restrictive and that the public and the private sector have an urgent need to clean their financial situation, we can expect the pace of recovery in consumption of households to slow in the first half of the year," he said.

The difference between yields on 10-year bonds Spanish and German pink fundraising Tuesday to 223 highest basis points from a euro-ère top hit in June.

Economy and Treasury Secretaries Spain, two a Tuesday reiterated the commitment of the Government to reduce its deficit.

If the plan Spain aimed at reducing the deficit 6pc domestic product gross next year 11pc last year shows signs of being inaccessible, the country could become the next target market concerns about debt on the periphery of the euro area.

"We will have no problems to the Ireland if we carry out all the adjustments and reforms that we have done and those that we are such that the reform of pensions," the Treasury Carlos Ocana Secretary told journalists in the Senate.

Previously, he made a clear distinction between the Spanish banks and the Ireland saying that they "cannot be compared.

"It has its problems with the cajas (savings), but system has undergone a process of restructuring big," he said.

The Spain savings banks were exposed hugely bad debt accumulated during the boom of the property and now underwent a process of restructuring through government funding and a wave of mergers which reduces their number less than 20 45.

Portugal and the Spain are considered next nations most vulnerable to disturbance of the market after the rescue of the Greece and the Ireland.

The Spain is responsible for large concern EU because it represents the Ireland of economy of the euro area, unlike the Greece 10pc and Portugal, which account for less than 2pc each.

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Confused reports continued to swirl as Irish Finance Minister Brian Lenihan ready to meet with colleagues in the euro area than during Tuesday night dinner in Brussels. Dublin has so far accepted to organize discussions on "market conditions" with the partners of the EU, but insists on the fact that it is fully funded by until June and hopes to calm the nerves to €6bn (￡ 5 Institute) budget reduced at the beginning of December.

Simon Derrick of the Bank of New York Mellon said that negotiations on bailout the Ireland were amazing."Creditors say please take money, and the debtor said" we want that it ".C' is very strange."

"Yet the European Union is good thing to try to create a wall of fire as soon as possible.Ils have learned the Greece once bond yields reached this level, they have 10 business days left to avoid daytime crisis." "They do allow to spread to a large country, because at that time where the contagion has become overwhelming", he said.

Contagion has already pushed the Portugal aboard, pushing yields on bonds of 10 years for the level of risk over 6 5pc.Finance Minister Fernado Teixeira dos Santos said the country is at the mercy of global forces can be forced to ask for help.

"The risk is high because we face not only a national issue or country .c ' is the Greece, Portugal Ireland. market view problems these savings because we are all in this together in the euro area." "Suppose that we are not in the euro area, the risk of contagion may be lower," he told the Financial Times.

M. Teixeira is slightly veiled attack German Angela Merkel and Nicolas Sarkozy France, which precipitated the latest crisis in opening the door to default sovereigns and holders "haircuts" for the States of the eurozone in difficulty.

"We like the running target and ready to kicked in the target and then someone because of us soccer player, but this time, is there no penalty."

A simultaneous the Ireland bailout and the Portugal may operate to €200bn, depleting a large part of the EU lifeline. European installation of financial stability (EEHC) can raise up to €440bn on bond markets, but only two thirds of it disponibles.Il CAU supposed to 3 EUR extra for each €8 EU bailout formula.

The concern is that the crisis could extend to Spain, which has a much larger than the Greece economy of Portugal Ireland combined.Foreign banks have €850bn Spanish debt exposure.

David Schautz, Commerzbank, credit strategist said that EU bailout Fund would come under "serious strain" Spain need sauvetage.Pourtant operation, this is still a risk serious Spain must roll over or lifting of €175bn debt next year.

Mr. said Schautz funds become wary if Spanish 10-year bond yields rise much 5MC above, compared with 4 5pc at this time."Investors are nerve and panic can get fast", he said.

Economy Secretary José Manuel Campa, Spain, said his country was "Greece nor Ireland and never will be."The Spain economy stagnates again but debt is still just 66pc GDP deficit and budget and current account fall quickly.

Cannot be said of the Greece, where the debt crisis is going from bad to worse despite his rescue €110bn avril.Eurostat revised GDP last year 127pc 115pc Greece debt while the deficit is still worse thought 15.4pc.La debt will go to 144pc of GDP this year, risking a compound debt trap.

The Prime Minister George Papandreou said that the country can apply for an extension of its debt repayment schedule, a move interpreted by investors as the beginning of a slippery slope to default.

He accused Germany grow weaker EMU States on the edge by pressing on hair holders, saying: Ms Merkel proposals had "created interest rates higher for countries in a situation difficile.Cela spiral could create a prediction .c ' is like saying to someone,"because you have a problem, I will put an even greater burden on the back."""This could force economies towards the bankruptcy", he said.

Ireland, the use of the EU or the IMF would be traumatic, a compelling on a Fianna Fail Government which was still basking in the glory of the Celtic Tiger verdict everything just three years ago.

M. Lenihan seems determined to clothe all rescue as a bail-out for banks rather that to the sovereign irlandais.Cela cannot be easily. Vice-President of the ECB, Vitor Constancio, said the GED "" can lend directly to banks: installation-ready Governments. ""

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