Global, and in particular European markets, slipped yesterday as fears of a ‘Lehman-style tsunami’ spread across the EU as Spain and Portugal slipped into the economic and financial quagmire along with Greece.

It is understood that the EU may even need to step in to halt the slide, but whether this will come in the form of words, financial muscle, or putting Spain and Portugal on a leash along with Greece has yet to be seen.

What is certain though, is that the euro is taking a hammering and has lost a fair bit of ground against the dollar. The only reason the euro did not slip further is because the US produced some woeful job figures on the same day.

Greece registered a budget deficit of 12.7 per cent for the end of 2009 and Portugal has just announced a 9.3 per cent deficit and in addition, has just seen the failure of an e500 million debt auction.

But many analysts are saying that with its deep-rooted problems of unemployment and market inflexibility – the real problem is Spain. Its budget deficit hit the 11.4 per cent mark for 2009 and its economy is still contracting. In other words, the government is overspending, but it is not managing to bridge the gap.

Markets are now demanding that the EU announces its plan of action to shore up the stability of the currency, in the midst of criticism that Europe’s one-size fits all monetary policy has helped trigger the latest crises.

Jean-Claude Trichet, head of the European Central Bank, gave no hint yesterday that Frankfurt will bend to help these countries, either through loans or a more subtle form of bail-out through looser monetary policy or lax rules on collateral.

The EU has been very quiet aside from its pouncing on Greece and we will be sure to hear of more chest beating in the coming days as law makers will push for explanations and solutions from Portugal and Spain.

It is very likely that the EU will not give any more bailouts and will push for sever austerity measures, similar to the plan put forward in Greece. In a tough move, the Greeks taxed fuel and froze civil service pay and plans to crack down heavily on tax and benefit abuse.

Of course, as Greece has seen, this will lead to civil unrest, but as we have hammered home time and time again, this is what happens when one lives beyond their means. When a government and a whole nation does it – the results are disastrous.

While Malta continues to plod along slowly, it is becoming increasingly more apparent that while not all is rosy and red, our finances were in a very robust state and had various failsafe mechanisms to prevent this from happening to us.

One is sure that the EC will move to be granted special powers to directly intervene in Portugal or Spain’s efforts do not make the grade. Just as it has done with Greece, the commission will sit like a hawk on the governments’ shoulders. After all, the stake of the whole monetary union is at stake and one would not like to see anything like the 1998 Asian market currency crisis.