From Greece to Spain, and now Portugal, a government debt crisis is spreading along the eurozone's periphery, increasing concern over the stability of the monetary union that includes 16 European Union (EU) nations.

Stock markets tumble

Following Greece, Spain and Portugal proved to be the next weakest links in the eurozone economy. They have become the new focus of market anxiety due to the problem of soaring budget deficits and public debts.

The spreading government debt crisis led to sizable declines in major European stock markets on Thursday.

Madrid's key IBEX-35 index tumbled 5.9 percent, the largest one-day drop since the second half of 2008. Lisbon's PSI-20 index shed 5 percent. In markets elsewhere in Europe, both the French CAC-40 index and the German DAX index sank by more than 2.5 percent, while in London, the FTSE 100 index fell 2.2 percent.

Even the US markets came under pressure. The Dow Jones Industrial Average briefly crossed below 10000, down by 268.37 points, its worst one-day point slide since April 20, 2009.

In dealing with the worst recession since World War II, the Spanish and Portuguese governments pumped billions of euros into the economy. With less fiscal income, the two countries saw their deficits rise well beyond the 3 percent ceiling preferred by the European Central Bank (ECB) and public debts pile up.

It was estimated that Spain's deficit reached 10.4 percent of the country's gross domestic product (GDP) last year, and for Portugal 9.3 percent. Their public debts were expected to rise to 74 percent and 91 percent of GDP, respectively.

Under the EU's stability and growth pact, member states have to keep their budget deficits below 3 percent of GDP and public debts below 60 percent of GDP.