From Greece to Portugal to Spain

By the looks of things in Europe, those who predicted that 2010 would be the year of sovereign defaults may be proved correct sooner rather than later as the bond market seeks to punish nations for their past profligacy (and, in the case of Greece, for lying) and European Union officials take steps to prevent the group from fracturing.

Ambrose Evans-Pritchard files this report on the latest developments:

The European Commission has ordered Greece to slash public spending and spell out details of its austerity plan within "one month", invoking sweeping new EU Treaty powers to impose a radical shake-up of the Greek economy.

Greece's labour federation immediately called a general strike for February 24, dashing hopes that Europe's provisional backing for Greek crisis policies would restore investor confidence.

Joaquin Almunia, the EU economics commissioner, said tough measures were "extremely urgent" to prevent a further flight from Greek debt.
...
Mr Almunia said concerns have spread beyond Greece to other eurozone countries where public finances are spinning out of control, chiefly Spain and Portugal. "In these countries we have seen a constant loss of competitiveness ever since they joined the eurozone. The external financing needs are quite big," he said.

Yields on 10-year Portuguese bonds jumped 21 basis points yesterday as funds switched their fire to the next "domino", questioning whether the government of Jose Socrates can deliver spending cuts without a parliamentary majority. "The lightning rod has been passed to Portugal: who is next – Spain?" asked Marc Chandler, from Brown Brothers Harriman.

Apparently, the European Union has broad powers to meddle in member country's pensions, healthcare, and labor markets, powers that governments no doubt thought would never be used. Somehow, the situation looks as though it's going to get worse (maybe a lot worse) before it gets bettter.