When the Irish bailout was first announced, stocks in Europe rallied and the bond market seemed to settle a bit.

But that proved to be a temporary phenomenon. Worries over Portugal (and its Iberian neighbor Spain who might tip the whole applecart over if she goes under), as well as continued fears about Greece, Italy, and now Germany who is bankrolling a lot of the debt, have caused some observers to start talking in apocalyptic terms about that might transpire unless there is a turnaround soon:

The average yield for 10-year debt from Greece, Ireland, Portugal, Spain and Italy reached 7.57 percent today, a euro- era record. The average premium investors demand to hold those securities instead of German bunds widened to as much as 492 basis points, the highest level of 2010. The average cost of insuring against default by the five nations using credit- default swaps reached a record 517 basis points on Nov. 23.

"It's no longer taboo to speak about a restructuring," said Johannes Jooste, a portfolio strategist at Bank of America Corp.'s Merrill Lynch Global Wealth Management in London, which oversees about $1.4 trillion for clients. "The fact that bond yields continue to rise and put pressure on countries that have to fund from the market makes investors less and less confident, and it's bringing forward the day of reckoning."

The Nov. 22 relief rally after Irish Prime Minister Brian Cowen conceded that the nation needed financial support proved transient. Irish 10-year bond yields fell 4 basis points, before jumping 104 basis points as of 3:13 p.m. in London today, exceeding 9 percent for the first time since 1995. The euro's respite was more fleeting; the bailout inspired a 0.8 percent gain for the currency before it slumped to a two-month low. It fell 0.9 percent to $1.3247 today.

"Restructuring" is an interesting euphemism for picking and choosing who gets paid back and how much in order to avoid a complete collapse. 

It looks like 2011 is going to be a make or break year for the Euro as well as the EU. Germany will not be left holding the bag if the bailouts keep coming - especially if Spain needs a hand since their economy is the largest of all the seriously troubled nations. At some point, Chancellor Merkel will say Nein and then it will be chaos.

With our own large financial institutions intimately tied to Europe, such a scenario might cause another meltdown such as we saw in September, 2008. So much of what is happening is the result of perception that it might not come to that if the central banks in Europe can continue to fund the debt of nations in trouble.