Ireland gets its bailout. Now who will bail out the rest of the world?

So Ireland got its bailout. Marketwatch reports:

After weeks of insisting that it didn’t need a bailout, the Irish government said late Sunday that it will start formal negotiations with the European Union and the International Monetary Fund over a financial rescue package.

The United Kingdom and Sweden have also indicated that they are ready to consider loans.

Earlier in the day, Irish Finance Minister Brian Lenihan had declined to specify a total figure for the bailout except to say that it would be less than 100 billion euros ($136.7 billion).

The Irish government will put forward a strategy to provide details of €6 billion of fiscal consolidation in 2011 in order to cut the country’s deficit to 3% of gross domestic product by 2014. An overall consolidation of €15 billion is expected to be achieved over the four years to 2014. Irish Prime Minister Brian Cowen detailed in a press conference that spending cuts of €10 billion and tax increases of €5 billion are expected to make up the total amount.

Additionally:

Ireland’s banks will be pruned down, merged or sold as part of a massive EU-IMF bailout taking shape, the government said Monday as a shellshocked nation came to grips with its failure to protect and revive its banks under its own powers.

But the story is far from over.

First:

A “multi-notch downgrade” of Ireland’s Aa2 rating is now the “most likely” outcome of a review of the nation’s sovereign-credit rating, Moody’s Investors Service said Monday in its weekly credit outlook. Such a downgrade would leave Ireland’s rating within the investment-grade category, the agency said. Ireland on Sunday applied for a European Union-International Monetary Fund aid package that is expected to be used to make direct capital injections into the nation’s banks. While the move is positive for the standalone credit quality of the banks, it will shift the burden of support to the Irish government, underline bank-contingent liabilities on the government balance sheet and increase the sovereign’s debt burden, the agency said, “a credit negative for Ireland and, consequently, the credit quality of bank deposits and debt that the sovereign explicitly and implicitly supports.”

And:

Ireland’s Green Party, the junior partner in the coalition government, on Monday said the nation needs to hold a general election in the second half of January, according to Irish state broadcaster RTE. Party Leader John Gormley said he had discussed the issue with Prime Minister Brian Cowen. Gormley said the government needs to produce a credible four-year plan, deliver a 2011 budget and secure funding support from the European Union and the International Monetary Fund. Gormley said people felt misled and betrayed and that the Irish people need political certainty to take them beyond the coming two months, RTE reported.

But Ireland is just the tip of the iceberg. Or maybe Greece was the tip and Ireland is the rest of the above-water portion of the iceberg. But remember, 90 precent of the iceberg lies underwater. Any way:

Any deal between the Irish government and the European Union and International Monetary Fund to resolve Ireland’s financial crisis is ultimately aimed at cutting short the turmoil in sovereign bond markets that policy makers fear could one day price Portugal or even Spain out of global credit markets.

Portugal, which like Ireland is a small economy with a relatively illiquid debt market, is seen as the next country likely to find itself in the sights of bond traders.

Traders and analysts had hoped that a bailout of Ireland would settle credit default fears, but it has done no such thing. Just look at the stock market today which is down about 100 points. Now that Ireland has been bailed out, instead of jumping for joy, traders are turning their attention to Portugal and Spain, wondering not if but how long until they too need bailing out.

And the sovereign debt crisis continues… Just as I predicted months ago.