Merciless markets pound away at Spain's claim to be solvent

Contagion is confirmed. In the aftermath of the Irish débâcle, Spain on Tuesday remained locked in its own dire battle with the financial markets to convince them it is not another Ireland waiting to happen.

The Spanish blue-chip Ibex 35 index took another hammering, shedding 3.05 percent led by the banks, while the country's risk premium hit a new euro-zone era record of 235 basis points. Investors heightened aversion to the "Made in Spain" brand also took a heavy toll at Tuesday's three- and six-month bill tenders, with the Treasury obliged to sharply raise rates to convince investors to take on what they perceive to be the heightened risk of holding Spanish debt.

German Finance Minister Wolfgang Schäuble stated that the future of the euro was "at stake" as a result of the growing debt crisis.

Along the lines of Monday's shamrock-tainted mayhem, Spanish officials lined up to sing the merits of the government's program to get its financial house back in order as the markets opted to play tone deaf despite some concrete evidence in the administration's favor. The government's belt-tightening endeavors are starting to pay off, with the Economy Ministry on Tuesday revealing the shortfall in the administration's books had almost halved in the first 10 months of year.

But one of the clamorous compulsions driving the government's heightened reformist zeal was also evident on Tuesday as an audit showed savings bank Cajasur's losses were four times the levels previously believed because of its exposure to the real estate sector, which as in the case of Ireland went from bubble to burst.

The Bank of Spain has demanded that long-drawn-out consolidation in the savings bank sector be well under way before the end of this year. And as the head of the central bank, Miguel Ángel Fernández Ordóñez, also pointed out on Tuesday, other structural reforms, such as the state pension system, are also pending.