But problems in the residential-mortgage arena are starting to crop up, fueling fears that a second wave of losses could hit even Ireland's healthiest banks. Those fears are one reason why jittery investors punished shares of Irish banks. An index of Irish financial stocks fell 5.3%, and shares in Bank of Ireland, one of the country's biggest mortgage lenders, tumbled 5.6% in Dublin.

A rising tide of Irish households has been falling behind on their mortgage payments. More than 36,000 borrowers, representing 4.6% of Irish mortgage loans, were at least 90 days behind on their loans as of June 30, according to Ireland's financial regulator. That compares with 26,000, or 3.3%, nine months earlier. Data for September, due next month, is expected to show another rise but remain below the U.S. rate, which was above 9% in June.

In a foreboding sign, nearly 200,000 Irish mortgages-about one of every four outstanding home loans-is expected to be "underwater" by the end of the year, according an estimate made earlier this year by David Duffy, a research officer at the Economic and Social Research Institute in Dublin. That means the outstanding loan balance will be greater than the underlying value of the home, increasing the odds that borrowers will default. If the house-price decline becomes even more calamitous, Mr. Duffy said in a March paper, some 350,000 homeowners could be underwater.

Eoin Treacy's view These additional articles by economist Morgan Kelly for the Irish Times and this article from the Financial Times' Alphaville service by James Cotterill may also be of interest. . At present doubts about the ability of peripheral governments to get their fiscal houses in order are pervasive. This is at least in part driven by uncertainty relating to upcoming Irish budget, the passing of the Portuguese budget, the failure of Belgians to form a government and continued French resistance to pension reform.

Irish government bond spreads over German Bunds hit 547 basis points today. Portugal has widened to 438, Spain is at 200 and Italy is at 160. Greek spreads have also widened out to a lofty 900 basis points.

The Euro Trade Weighted Index peaked between 2008 and 2009 near 145 and pulled back to 120 during the Greek sovereign debt crisis. The Index rebounded impressively from September and paused over the last month, having rallied back above the 200-day MA. It failed to sustain a breakout from the short-term range last week and has returned to test the lower side. It needs to find support in the region of 129 if the two-month bullish outlook is to be sustained.