Spanish and Portuguese leaders, with reinforcements from Brussels, are fighting a rearguard action to convince investors that there is no need for further eurozone bail-outs after the €80bn-€90bn ($109bn-$122bn) rescue agreed for Ireland at the weekend.
"Absolutely not," said Elena Salgado, Spanish finance minister, when asked in a radio interview on Monday whether Spain needed help from the European Union. "Spain is doing everything it has promised to do, with tangible results."
Portugal is regarded by bond market investors and economists as next in line for a rescue after the bail-outs of Greece and Ireland. But José Sócrates, Portuguese prime minister, was adamant that there was "no connection" between the Irish rescue and Portugal's problems.
"Portugal doesn't need anyone's help and will solve its own problems," he said, insisting that the country had a clear strategy to cut its yawning budget deficit.
As stock markets fell and the euro gave back early gains that followed the Irish deal, European officials weighed in on Portugal's side to try to calm speculation about the next bail-out.
Olli Rehn, European commissioner for economic and monetary affairs, said the problems of Portugal and Ireland were "very different" and that Portugal had taken "very courageous measures" to reduce its deficit and implement structural reforms. Jean-Claude Juncker of Luxembourg, who heads the group of eurozone finance ministers, said speculation against Spain and Portugal was "not justified".
By Monday afternoon, however, there was little sign of such reassurances making any impact on the financial markets. From Greece in the south-east of the eurozone to Ireland in the north-west and now Portugal in the south-west, the crisis seems to be moving around the periphery of the single currency area.
Those three economies are relatively small. A rescue of Spain, however, would place enormous strain on the eurozone. The country is the fourth-biggest economy in the area larger than Greece, Ireland and Portugal put together.
Asked what Spain and Portugal should do to stop the so-called contagion, Edward Hugh, a Barcelona-based economist, replied: "Not do anything wrong." He went on: "The only thing you can advise these people to do at this stage is to be absolutely frank and stick absolutely to what they say."
Spanish and Portuguese ministers argued that they have done just that -- although in the case of Portugal the actual budget numbers for the first nine months of this year showed the deficit had widened rather than narrowed and have repeatedly declared their commitment to harsh austerity plans.
Austerity, though, is no longer enough to convince investors, in part because it has dawned on many of them that choking the life out of an already weak economic recovery may not be the best way to boost government revenues or repay debts.
"From this point on, the more you do fiscal austerity, the more you contract and the less you can pay," said Mr Hugh.
Spain's latest fall into the role of potential bail-out recipient is particularly galling for the socialist government because the country appeared to have graduated from the bottom rung of the eurozone fiscal ladder. While the €750bn package of eurozone rescue funds that followed the Greek bail-out was originally devised with Spain rather than Ireland in mind, Spain was recently rated by the markets just below Italy as a moderately low-risk eurozone member.
In Portugal, Mr Sócrates has sought to emphasise the country's differences from Ireland, saying it has a sound banking system that has withstood the global financial crisis without significant difficulties and has not suffered a housing market collapse.
Mr Sócrates said his minority socialist government was committed to reducing its budget deficit from a record 9.3 per cent of gross domestic product in 2009 to 7.3 per cent this year. Portugal would have a "lower deficit than France, not to mention Greece, Ireland, the UK, the US or Japan", he said.
But financial markets have yet to be convinced and Lisbon still faces a battle at home to address its own problems.
Portugal's two trade union confederations are to hold a 24-hour general strike on Wednesday in protest against austerity measures in the 2011 budget, which is due to be approved after a final vote in parliament on Friday.
The measures, including a 5 per cent cut in public sector pay, a state pension freeze and tax increases, were agreed after weeks of negotiations between the minority government and the centre-right Social Democrats, the main opposition party. In spite of the agreement, a general election could be called next year.