The buzz word is “contagion”, the fear that the financial crisis will spread. With the Irish economy on the brink of collapse, the government has been forced to introduce even more draconian cuts to the tune of £20bn to pave the way for an EU/IMF bail-out package. All eyes are now turning to Portugal and even Spain as the speculators move from one country to another.

Ironically, it was only four months ago when regulators announced that Europe’s banks had passed a stress-test and were all given a clean bill of health – including those of Ireland. Now they seem to be the most “stressed” of all, as bank shares plunged by 20%.

As Alan Wild, head of fixed income and currency at Baring Asset Management explained, “Contagion is a big problem for the eurozone. The danger is that worries about Ireland will continue rather than ease, and the crisis will spread to Portugal, then Spain, then Italy. If Spain needs to be bailed out, then that raises worries about the eurozone as a whole.” In other words, they will all swim or sink together. The only thing is if Spain defaults, its economy is bigger than Ireland, Portugal and Greece combined. Any rescue package would be astronomical and undermine the whole eurozone in the bargain.

“For us contagion is the issue... If the market loses confidence in Spain, then all bets are off. Spain in too big to bail,” says Guillaume Fonkenell, chief investment officer at Pharo.

The vultures are beginning to circle. Bridgewater, the world’s biggest hedge fund, warned, “We judge Spanish sovereign credit to be much riskier than is discounted because it seems to us that there is a high risk that Spain won’t be able to sell the debt that it needs to fund its deficits.” They are betting that Spain will be plunged into crisis in the first quarter of 2011.

We saw the way in which the Asian crisis spread in 1997-98, eventually forcing Argentina to default, triggering a massive slump and political turmoil.

Ireland is not out of deep water by a long way. The new austerity measures, if agreed, will serve to further undermine the crisis-ridden economy, giving rise to further speculation.

Bank share in Portugal also fell sharply. The country’s debt problems have virtually frozen them out of international capital markets, forcing them to rely heavily on help from the European Central Bank, as do the Irish and Greek banks. This makes them vulnerable to speculation and the next likely target for the financial loan-sharks (the “markets”). The austerity programme has already provoked deep anger, as elsewhere, with further general strikes.

The strategists of capital thought they had contained the Greek crisis in May. There was a huge sigh of relief. But that was short lived as the crisis spread to Europe’s peripheral economies. We are facing the biggest crisis the eurozone has ever faced, as hedge funds start betting against the euro, which in turn will feed back into a renewed financial crisis.

Whatever the next point in this drama, destroying millions of livelihoods in the process, the stage is being set for the next global economic crisis. Once again the working class will be asked to bail-out the capitalist system. Once is enough.