Several signs indicate the European Union may be heading toward a major financial crisis.
After a debt-crippled Ireland finally swallowed its pride and asked the EU for a bailout, it now appears Spain, the fourth-largest economy in Europe, may follow suit. The country is in serious financial trouble -- a circumstance that could have a negative effect for the rest of the world as well as Europe.
Unrest in Dublin
A protest in Dublin showed how unpopular Ireland's budget problems that prompted the bailout have become. It is likely to force the ouster of Irish Prime Minister Brian Cowen.
The country's banks -- now solely dependent on loans from the EU -- will be trimmed, merged or sold as part of the agreement. Ireland now also faces tough conditions like those imposed on Greece when it received a bailout earlier this year.
"When it came to Greece the Greeks were stuffed with all sorts of tough conditions, which they are finding it very, very hard to live up to," economist Andrew Hilton said. "It seems most unlikely that the Irish will be treated any more generously."
Next in line for a possible bailout is Portugal, which like Ireland, has also been insisting it does not need a loan. Financial conditions, however, suggest it's inevitable.
"Although we are not in a critical situation as Ireland or Greece, our situation is very difficult and we have a lot of debt," financial analyst Joao Leite said. "So indirectly everyone thinks that we are going to be the next to go and apply for European help."
Spain Bailout Looming
Still, it's not Portugal or Ireland that have analysts and investors worried. They're more concerned about Spain, whose economy is twice that of Portugal, Greece, and Ireland combined.
Therefore, trying to foot the bill for a bailout of Spain would be much more expensive -- estimated to be well over $500 billion. That means other countries, like Germany and France, would have to tap into their sovereign debt markets to cover their share.
A bailout of Spain, in turn, would produce more uncertainty about the future of the EU and possibly send the euro into freefall. Such a bailout could have serious ripple effects throughout the global financial system and is the last thing the weak world economy needs.