Everybody decided to notice today that Europe’s debt-ridden economies did not solve their problems with austerity measures, they exacerbated them:

Fears that Europe could see another Greek-like debt crisis unfold in Ireland or Portugal escalated Tuesday, with investors selling off their bonds and analysts warning that both nations might be heading into critical periods that could trigger bids for bailouts.

The mounting problems in two of Europe’s smallest economies are emerging as the biggest threat to an otherwise robust recovery underway in the major economies of the region, including Germany and Britain. Deteriorating conditions in Ireland and Portugal have already pushed the euro off a five-month high against the dollar, causing fresh jitters in stock markets across the region and beyond.

A sharp turn for the worst, analysts say, could spark a new round of financial turbulence in global markets from New York to Hong Kong, last seen when Greece’s finances spiraled out of control over the summer. That crisis led to an emergency rescue by the Washington-based International Monetary Fund and the European Union.

As Edward Hugh explains, this is basically a consequence of not fixing the Greek crisis at the outset. The members of the European Union are linked together by a common currency, and Greece’s inability – impossibility – to pull themselves out of their problems without devaluation or default just anchors all the other countries. The bond spreads in Ireland and Portugal are now above where they were in May, at the height of the crisis.

Felix Salmon muses that the European Union has few good options, and may have to cut loose Greece, Ireland and Portugal to keep the other member nations afloat.

In any crisis, there comes a point where it’s easier to let things fall apart than it is to keep things together. Given how fractious the European project has always been, and given that the generation of politicians who staked their careers on the European Union has now completely retired from the scene, a breakup would seem to be an inevitability at this point. The only question is when it will happen, and who will go first.

This is happening because of a pretty badly designed EU in the first place, but also because central bankers have reacted abominably to the crisis, worried far more about inflation and debt than employment. You can see that in the street protests in major European capitals today, demonstrating against austerity that has not brought any appreciable relief and has in fact made the economic situation demonstrably worse.

Italy and Spain are the next countries who could follow Ireland and Portugal with Greece into the abyss. Either the policymakers figure out that pain cannot lift anyone up, or Europe will descend into another recession, and probably take the world with it.