Ireland and Greece led a surge in the cost of insuring European sovereign debt from default on concern bondholders will be forced to share the cost of future government bailouts.

Credit-default swaps on Ireland jumped 16.5 basis points to 490, matching the Sept. 27 record closing price, according to data provider CMA. Greece climbed 31.5 basis points to 818, the highest level since Sept. 20. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 2.5 basis points to a one-month high of 154.

Investors are speculating German Chancellor Angela Merkel will persuade European Union leaders to force burden sharing after governments pledged 860 billion euros ($1.2 trillion) of taxpayer money to stem the region's deficit crisis. Irish bonds declined, driving the extra yield investors demand to hold the securities instead of German debt to a record, on concern the nation will struggle to fund its budget gap.

"It has become apparent that it is possible that some kind of restructuring procedure may well be put in place and the reaction in the bond market has been what you would expect," Gary Jenkins, head of credit strategy at Evolution Securities Ltd. in London wrote in a note to investors.

Swaps linked to Portugal rose 8 basis points to 387, Spain increased 8 to 222.5 and Italy added 4.5 basis points to 176, CMA prices show.

Eoin Treacy's view I compiled this table of 42 sovereign CDS spreads using the Chart Library's Performance Filter and sorted it using Excel. Here are detailed instructions on how to create your own Chart Library Performance Filters.

The five highest spreads are Greece (811 basis points), Argentina (626), Ireland (472), Dubai (417) and Portugal (377). Argentina's spread is contracting and Dubai's is relatively steady given the fact that Abu Dhabi is likely to continue to assist its neighbouring emirate in the event of a credit problem. The conditions imposed on peripheral Eurozone countries by the European Commission, led by Germany, have been onerous. This is particularly the case since the fiscal adjustments required are to be accomplished without recourse to currency devaluation.

CDS spreads for Greece, Ireland, Portugal, Spain and Italy remain on an upward trajectory. Last week, the scale of Ireland's fiscal adjustment over the next four years was revised sharply upwards from €7.5 to €15 billion. Concurrently, the Portuguese government is at an impasse on agreeing what budgetary cuts to make. Greek CDS spreads also rallied emphatically last week. These issues, in tandem with the expansion of peripheral European CDS and sovereign spreads, suggest that the Eurozone sovereign debt crisis will remain a medium-term cause for concern.

There has been a great deal of academic commentary on the imbalances in the global economy. Perhaps a more pressing issue for now are the imbalances evident in the domestic economies of the USA, Europe, Australia, Canada and the UK. All of these regions share a common characteristic that their export sectors are performing well but their domestic economies are under pressure. Differences clearly manifest themselves in the degree to which the respective economies rely on their export markets. Australia and Canada have already begun to normalise policy at least in part because of the continued strong demand for the commodities they export.

The USA continues to face a headwind from the housing crash and credit crisis, the Eurozone from the periphery's debt crisis, the UK from the collapse of its banking system and its own fiscal adjustment. These issues are going to take time to resolve and probably ensure that the competitive devaluation that has been in evidence for the last couple of years is likely to remain a feature of interest rate and foreign exchange markets for the foreseeable future.

Hawks at the ECB who seek to ensure German inflation remains muted may have their hands tied by the continued fiscal pressures on the periphery and the exposure of core Eurozone banks to peripheral debt and the need for access to cheap credit to prop up Greece, Ireland and Portugal in particular. If the USA and UK engage in another round of asset purchases, it is hard to see how the ECB can remain aloof given the resulting strength one might expect in the Euro.