Paul Krugman: Expecting the Worst

The Spanish bailout was agreed to this month, but with so many restrictions and indications that it isn't the start of something bigger that the markets were, to say the least, not happy.

I also think it's especially interesting to see just how much the recent rally in Irish bonds reflected hopes that the country's bank rescue could be "Europeanized"; once those hopes were dashed, it all went away. So when does the full-blown crisis start? Hard to say. At least some indicators say that the market expects the worst, but not right away.