FT Alphaville quotes a Royal Bank of Scotland assessment that Italy and Spain are crossing the threshold of no return in their interest rates:
Spain has entered the danger zone for yield levels. The chart [above] shows the yield moves in the constant maturity 10y paper for the GIIPS countries. These markets traded a range between 6 per cent and 7 per cent but ultimately this proved to be a pause before the move to higher yields then accelerated. There is no consistent yield trigger level inside this range but market talk of point-of-no-return around the 6 ½% is not without foundation either.I was somewhat skeptical of that outcome a month ago, but the latest data certainly give cause for concern. If the bond markets do lose confidence in the ability of Italy and Spain to service their debt, that can quickly become a self-fulfilling prophecy. In turn, it's hard to see how that doesn't lead to a full-fledged existential crisis for the euro, which I think has to cause a contraction in the real European economy, and probably the global economy (although the latter would be somewhat mitigated by the reduction in commodity prices due to reduced European demand).
Update: I had some thoughts on the general nature of these kinds of confidence loss events here.