Where will it end? So far, Greece and Ireland have in effect thrown in the towel and admitted they can't cope with their huge national debt burdens alone.
Now speculators are focusing on eurozone countries such as Portugal, Spain and Belgium. Evidence that the markets don't believe they can survive without some form of bail-out comes from debt spreads as fears mount, the gap between the yield investors demand for holding safe German bonds and much less safe 'periphery' nation bonds widens. Just today, for example, that gap for Spanish and Italian government bonds hit record highs (since the euro was introduced).
"Speculators are targeting Italy and Spain and are not going to stop. We haven't seen any selling from real money (accounts) yet, they're all very nervous but haven't started selling, when they do it's going to be a wash", one Italian trader said this morning on Reuters.com.
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Meanwhile, credit default swap rates (which reflect the price of insuring against default as an institutional investor) are at their highest on many banks since April 2009, as investors mull just how much exposure to these ailing economies they may be carrying.
The question for a spread better is how best to play all this? There are several options. You can play the euro against other major currencies such as sterling, the US dollar and the yen.
Or, with the UK and the US still busy with quantitative easing in effect creating and therefore cheapening their currencies and the euro under fire, you might decide to play 'flight to safety' assets instead. Options include gold which sets new highs pretty regularly or silver, which is doing the same.
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