A wave of financial doubt is heading inexorably from Greece to Iberia.

Prime Minister José Luis Rodriguez Zapatero met yesterday with opposition leader Mariano Rajoy in a bid to stem turmoil from hitting the country. It is a case of forewarned being forearmed – and unlikely bedfellows joining to face adversity.

The two rival politicians met as contagion fears about Greece’s debt crisis swept the markets. And the result of the meeting was an agreement to shore up the dodgy savings banks which control almost 50% of the country’s lending and deposits.

The two men also seem to be in broad agreement about austerity measures, but the Spanish PM has sought help from his conservative enemy because his normal friends wouldn’t stomach such socio-economic strictures.

“We are in a critical situation, as shown by the recent fall in output, and by the lack of confidence of markets” toward Spain, Mr. Rajoy said at a press conference. While the country has a public-sector debt level that is relatively low in European terms, the debt is rising more quickly than anywhere else. And Spain has economic problems that Greece doesn’t: it is wrestling with the construction boom collapse that swept the economy deep into recession…..and doubled its public-sector accounts deficit almost overnight. The country also has one of the worst gdp outlooks (-4%) in the EU. A Slog credit management source on the spot told us last night:

“It’s pretty much the same old story….lots of good intentions but no concrete plans. Lots of growth numbers with no sign of any engines to drive them. We’ve heard this stuff before, and it’s wearing thin”.

Portugal meanwhile seems close to having its credit rating cut by Moody’s for the first time as the country tries desperately to reduce its deficit and stimulate economic growth. The ratings agency has informally given a small downgrade, with warnings of worse to come.

“Today’s rating action reflects the recent deterioration of Portugal’s public finances as well as the economy’s long-term growth challenges,” said a Moody’s spokesman. “The company believes that increased risk discrimination in the financial markets may raise Portugal’s financing costs for some time to come.”

In what is becoming a familiar sight in the Bond markets, Portugal’s risk premium rose 41 points to 294 today. The country’s short-term borrowing costs sky-rocketed as it sold six-month bills at an average yield of 2.955 percent – almost six times the 0.592 percent yield at a similar sale in early January.

In London, Paris, Berlin and Frankfurt there are lots of people going lalalalalaa, but this isn’t going away. Frankfurt’s ECB management in particular need to realise (and fast) what an unpleasant set of demons they released along with Greece’s ‘one-off’ junk-for-cash swapline of credit last Tuesday. The deal is about as one-off as the morning sunrise.