The ongoing eurozone debt crisis is threatening to spread like wildfire. For most analysts, it is not anymore just an issue of economically weak countries defaulting on their debts. It is also not anymore just an issue of euro’s forex value. More importantly, it is already an issue of euro’s survival as a single European currency. Along with it is the threat of political and economic disintegration of the European continent.

After Ireland officially bailed-out quite recently, Italy is now being pulled into the quagmire of sovereign debt crisis. The markets are afraid of the possibility that Italy might be the next domino piece that will fall after Greece and Ireland. This of course will cause further market volatility and dimmer economic prospects for the eurozone.

As the eurozone debt crisis threatens to spread like an epidemic, the foreign exchange value of the euro further weakened against a basket of other major currencies. Meanwhile, the borrowing costs of eurozone countries that are deeply in debts soared even higher. The financial trading sector, analysts and policymakers are again fearful about the future prospects for the euro and the European Union itself. Unfortunately, the recent bailout of Ireland was not enough to boost the confidence of investors.

Instead of appeasing the already volatile financial trading sector, the recent bailout of Ireland triggered the fear that it might be leading to a domino-effect wherein Ireland is just the second domino piece to fall after Greece. The economically weakest member-countries of the eurozone seem to be next in line to be infected by the debt crisis contagion. The markets are now worried about Italy, Spain, Portugal and Belgium.

As a result of market volatility and growing unease, the international borrowing costs for the Italian and Spanish governments recently soared to their record high levels. International money markets are now imposing higher interest rates for these countries. As a benchmark, the borrowing costs for Germany compared to the borrowing costs for Italy and Spain are now at their highest levels since the euro was adopted approximately twelve years ago. The interest imposed on the German government is only 2.7%. On the other hand, Italy and Spain must pay 4.8% and 5.7%, respectively.

Although the borrowing costs for Italy and Spain are still not as high as the 11.7% imposed on Greece, these cost are still considered as precariously high for large economies. By comparison, the United Kingdom only pays 3.2% interest in its loans.

Europe’s single currency has weakened against the dollar yesterday (November 30), sliding down below the critical $1.30 level. This was the first time it dropped below this level for almost three months already. Meanwhile, it also weakened against the British sterling and the US dollar. For a period of only more than one week, the euro shed 6.5% of its forex value against the dollar.

Some economic analysts think that the worse is yet to come. This pessimistic attitude is shared by the deputy head of UBS’ global economics division, Paul Donovan. He is convinced that the ongoing eurozone crisis is hardly halfway through.