The most recent incarnation of the financial crisis emanating from Europe has caused gyrations in the world's share markets, and by the looks of Spain's ailments, the roller-coaster ride has just begun.

Spain's financial sector looks particularly sick.

Savings bank CajaSur, reportedly run by a Catholic priest, has already been bailed out by the country's central bank, and another 12 of the country's 45 local banks have entered various merger talks.

The spate of merger activity has been triggered by two things: the smaller, more desperate banks are trying to avoid following CajaSur's path because the government has promised legal action against managers of failed banks; and new rules have been introduced that will force banks to make provisions for bad-loan losses after they have been in arrears for more than a year.

For a decade leading up to the crisis, Spain rode a residential property boom, fuelled largely by debt and at its peak, construction accounted for 16 per cent of GDP and 12 per cent of its employment.

But with house prices falling since 2008, the pressure has been enormous on borrowers and their banks, and for investors, the main problem with Spain's descent into turmoil is its size: the eighth-largest economy in the world.

Although Greece's difficulties may be considered by some to be too small to cause a ripple in the global marketplace (remember that the US subprime mortgage market was once similarly regarded), the fact the contagion has spread to a country with five times the GDP of Greece has to register on everyone's radar.

Austerity packages in both Greece and Spain have been hard to sell and although Greece's is further advanced, it is still meeting resistance: for example, some drug manufacturers have withdrawn products because of the forced cut in medication prices implemented by the government.

Strikes have been socially disruptive in Greece, and a major strike has been planned for public servants in Spain, after a wide-ranging wage cut there.

With unemployment running at about 20 per cent in Spain, strikes will be large and vocal.

How long will it take for the rest of the PIIGS (Portugal, Italy, Ireland, Greece and Spain) to seek support from Germany or the IMF?

Some commentators are suggesting the result of the Eurovision Song Contest, won by Germany, is telling: currying favour with a potential economic saviour is part of the politics of the contest for euro-zone minnows.

In Ireland, investigations are under way into tax-driven property incentives that fuelled a massive amount of borrowing and stretched its banks' balance sheets beyond breaking point, leaving the government to pick up the pieces.

Italy is tackling hard excessive government spending and curbing retirement pensions.

It is also doing away with a whole layer of government in some areas.

Like Greece, it is targeting tax avoidance and corruption by cracking down on evasion and false benefit claims, as well as banning cash payments of more than E5000 ($7250) for goods and services.

By cutting spending and focusing on tax collection, it hopes to cut its government debt, which is presently at 118 per cent of GDP.

Stuart Wilson is chief executive of the Australian Shareholders Association