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“Although Spain’s immediate public finance problems are not as bad as Greece’s, there are serious concerns over its longer-term economic outlook. The risk of contagion from the Greek crisis spreading across the eurozone is growing by the day,” he said.

David Starkey, a trader at Custom House, a Canadian foreign exchange firm, said the dramatic deterioration in Greece after S&P;’s downgrade and the sharp reaction around the world as stock markets plummeted by as much as 5 percent on the news show how quickly the Greek problem could become a threat to other vulnerable European countries and to the global economy.

After the downgrade, the yields on Greece’s two-year notes surged to 24 percent - the same levels paid by impoverished Pakistan - while the rates paid by Portugal, Spain, Italy and Ireland - along with Greece, the nations collectively known in financial circles as “PIIGS” - also shot up sharply, he noted.

“This move by Standard & Poor’s puts Portugal directly in the line of fire, with the remaining PIIGS on deck next,” he said. “The pressure is on the EU and IMF to broaden their bailout package, which will now likely need to include Portugal and perhaps also Ireland, Spain and Italy.”

“On the surface, the problem may appear to be a European one,” he said. “But as we learned from the American subprime crisis, mistakes made in one country can quickly become a global problem” because many banks around the world hold the debt of the countries in crisis.

“Rest assured, should the PIIGS situation become the PIIGS crisis, it will be global in nature, not European,” he said.

Desmond Lachman, a resident fellow at American Enterprise Institute, said the spreading crisis in Europe’s debt-burdened fringe countries has the potential to cause the breakup of the eurozone, because the richer nations will not be willing to bail them out and because the countries in crisis will not be able to endure the severe economic pain of staying within the union.

“Greece now poses a very real existential threat to the continuation of the euro,” he said. Adhering to the budget austerity plan attached to EU and IMF assistance would condemn Greece to “years of deep economic recession.”

He predicted that the efforts to bail out Greece and other countries will only “kick the can down the road” and delay their exit from the union.