The euro and European stocks fell today amid speculation and denials that Ireland faces a Greek-style economic bailout, while analysts warned that the turmoil risks spreading across the eurozone.
"Markets are starting off on the back foot once again as the woes of Europe rear their head once more," said Simon Denham, head of trading group Capital Spread
"EU policymakers seem to be worried that Ireland's problems could spill over into the rest of the so-called PIGS economies," said Neil MacKinnon, economist at financial group VTB Capital.
"Greece and Portugal present their 2011 budgets this week and Spain holds bond auctions on Tuesday and Thursday. The Irish budget deficit is scheduled for approval on 7 December but there is political opposition and there is a good chance that the budget will not be approved in its present form."
Greek public deficit and debt figures for the four years to 2009 shot up markedly on Monday, days after Prime Minister George Papandreou said a delay in bailout repayments may be necessary.
The Athens stock market rose 0.65 percent despite the shock data, while Dublin fell 0.11 percent and Madrid was flat.
Ahead of an EU finance ministers' meeting this week, Ireland said it was in contact with "international colleagues" over its economic difficulties but denied it had made an application for an European Union bailout.
"Ireland has made no application for external support. Ongoing contacts continue at official level with international colleagues in light of current market conditions," a Department of Finance spokesman said on Monday.
"The Irish government continues its work on the four-year budgetary plan and budget for 2011. Ireland is fully funded till well into 2011."
The comments came after days of denials by both the Irish government and the EU of reports that partners were pressuring Dublin to seek assistance in a bid to safeguard the stability of the euro.
"Should a bailout occur, we see the potential for moderate and temporary support for the euro," noted analysts at Barclays Capital.
"However, while the market may be temporarily calmed by an Irish announcement, we do not expect peripheral concerns to disappear quickly."
The single European currency was volatile last week amid fears over the debt of smaller economies, mainly Ireland, where the government's rising cost of bond purchases sparked rumours it might need a bailout.
Tension slightly eased after EU heavyweights Britain, France, Germany, Italy and Spain issued a joint declaration Friday insisting that a future bailout fund would not cause heavy losses to investors.
Ten-year Irish government bond yields stood at 8.152 percent on Monday after rocketing to nearly 9.0 percent last week, or the highest level since the creation of the European single currency in 1999.
Asian stocks were mixed as eye-catching Japanese growth data helped Tokyo shrug off worries about the eurozone and Shanghai clawed back some ground after a dramatic fall last week.
Tokyo ended the day up 1.06 percent and Shanghai won 0.97 percent.
US stocks had slumped on Friday, weighed down by growing concerns that China's economy might slow and amid the eurozone's debt troubles, traders said.