It was designed to ease investor fears but Europe's $125 billion bailout of Spanish banks is already falling short. For a few hours on Monday, the agreement by 17 European countries to shore up Spain's debt-ridden banks sharply lifted global markets. But by Tuesday morning, the thrill was gone and concerns of contagion spreading beyond Greece and Spain spooked markets, policymakers and other debt-ridden nations.

• The markets. In Bloomberg this morning, Jonathan Burgos and Adam Haigh survey Asian markets and the response doesn't look good. Asian stocks plummeted with the MSCI Asia Pacific Index dropping 12 percent from its peak on Feb 29 in a sign that Spain's bailout "won't tame the European debt crisis," they write. “There appears to be plenty of cynicism,” George Boubouras, an investment strategist at UBS, told the news wire as Japan's Nikkei declined 1 percent. “Contagion concern is still pretty much alive,” Eddie Tam, chief executive officer of Central Asset Investments, added. “We’re staying on the sidelines at least until the Greek election results.”

• The neighbors. In The New York Times, Liz Alderman and Elisabetta Povoledo spotlight how fears about Spain's troubles are spreading to other countries, Italy in particular, as investors began selling stocks and bonds fearing that the southern European country could be the next domino to fall. "The main fear is that Italy cannot grow its way out of a recession fast enough to pay a mountainous national debt. Other concerns include the fact that Italy, with the third-largest euro zone economy after those of Germany and France, will have to shoulder a large portion of the bailout bill even as it grapples with its own sharp economic downturn."
• The Fed. Over at Reuters, Jonathan Spicer reports that three Federal Reserve policymakers are sounding the alarm that the Spanish bailout isn't enough. "Markets are looking for the details of how much will be injected into what banks, whether that will be sufficient to stabilize those particular banks ... and what the terms and conditions are," Atlanta Federal Reserve Bank President Dennis Lockhart told reporters. Spicer said the officials are "warning that much is yet to be done to avoid global spillovers" citing its potential to damage the U.S. economy. "The European situation is one that we're monitoring very closely," said Charles Evans, head of the Chicago Fed bank, "and it does give one pause about what it means for the U.S. economy and the global economy." 

Want to add to this story? Let us know in comments or send an email to the author at jhudson at theatlantic dot com. You can share ideas for stories on the Open Wire.
John Hudson