A third straight day of decline in world financial markets on Thursday was vivid evidence of a scary proposition: That the fiscal crisis that began in Greece months ago is spreading across Europe like a virus, causing growing doubt even about the fates of nations with far more manageable levels of government debt, The Washington Post reported. It is called the contagion effect, economists' metaphor for the rapid and hard-to-predict spread of a financial crisis, and it's driven by the fragility of investors' perceptions.

The 13-month rally in credit markets is unraveling as Europe fails to contain its debt crisis. Money markets showed banks may be the most reluctant to lend to each other in six months and a derivatives index used to protect against European bank failures soared to a record. U.S. company bond sales are poised for the slowest week this year, while in Europe they all but disappeared, according to data compiled by Bloomberg. Emerging-market and mortgage bonds also tumbled.

Europe may need a broad cure to its debt crisis, but the increasingly awkward pairing of the European Union and the International Monetary Fund makes such action unlikely, The New York Times reported in an analysis. Just three days after a €110 billion ($134 billion) bailout of Greece was presented as the latest step to stabilize European markets, the opposite has transpired. Fears have spread through the financial markets that a larger epidemic would infect Spain, Portugal and perhaps other indebted countries outside the euro zone, like Britain and the United States.

Greece's fiscal crisis took a new turn to violence Wednesday when three people died in a firebomb attack amid a paralyzing national strike, while governments from Spain to the U.S. took steps to prevent the widening financial damage from hitting their own economies, The Wall Street Journal reported. In Spain, rival political leaders came together Wednesday with an agreement that aims to shore up shaky savings banks by the end of next month. Banks in France and Germany, which are among Greece's top creditors, pledged to support a Greek bailout by continuing to lend to the country.

A former Lehman Brothers Holdings Inc. executive on Tuesday disputed a central claim in Lehman's bid to recover billions of dollars from Barclays Plc, saying there was no secret $5 billion discount in the sale of Lehman's core business, Dow Jones Daily Bankruptcy Review reported. Lehman and its creditors claim that Barclays reaped a $5 billion windfall in the deal because as part of the transaction, the bank paid $45 billion in cash in exchange for $50.6 billion in securities.

Germany will live up to its responsibility for Europe and will help to prevent damage to the euro zone in future, Chancellor Angela Merkel said Wednesday, Dow Jones reported. Defending the government's Greek bailout bill, which foresees up to €22.4 billion in state-backed loans from Germany, Merkel said "Europe is looking at us today. Without us, against us, there won't be any decision. With us, with Germany, there can and will be a decision which lives up to the political, historical situation," Merkel said. She said she is "determined" that Germany will fulfill its responsibility.

National Irish Bank (NIB) has set aside €146 million for loan impairment charges related to losses on commercial property transactions, The Irish Times reported. The bank, which is outside the Government's guarantee scheme, said impairment charges related to bad loans were down €52 million on last year. The Danish-owned lender today reported losses of €133 million for the first three months of the year, saying economic conditions remained “very difficult”. The bank’s total loan book was €10.2 billion, down 5 per cent on last year.

The politician at the centre of Europe’s first big criminal trial of the credit crisis has urged banks to stop putting short-term gain ahead of long-term relationships with their customers. Ahead of Thursday’s opening of a trial against JPMorgan Chase, UBS, Deutsche Bank and Depfa, Letizia Moratti, mayor of Milan, rejected suggestions that Italy’s financial centre should have been a more sophisticated investor when dealing with derivatives, saying it had been duped.

A general strike Wednesday in Greece was halting flights, trains and ferries and paralyzing public services, as unions rally against major new spending cuts aimed at saving the country from bankruptcy, The Associated Press reported. All flights into and out of Greece stopped at midnight Tuesday. Schools, hospitals, tax offices and the Acropolis along with other ancient sites will be closed. There will be no news broadcasts, and shop owners have been called on to close their shutters during rallies.

The sell-off in global markets has accelerated amid fears that the eurozone debt crisis would worsen and that China’s recovery is faltering, the Financial Times reported. From Hong Kong to New York, there was mounting concern that the €110bn international rescue package for Greece would not prevent the crisis spreading from Athens to other highly indebted eurozone nations. The euro dropped to a one-year low against the dollar, European shares plumbed two-month lows and the bond markets of weaker eurozone economies fell as rattled investors sold risky assets.