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DUBLIN The Irish economy is in desperate straits. No one disputes that. Its bank debt is the highest in the world. It amounts to something like Β£12,000 (14,000 euros) for every man, woman and child in the Republic of Ireland.

Last week the financial markets declared loudly that they regarded Ireland as a risky bet and forced up the cost of borrowing.

EU officials looked on with increasing anxiety. What they feared was a replay of the Greek crisis earlier in the year, when indecision threatened the entire eurozone. Once again the fear was of contagion - that Ireland's problems were forcing up borrowing costs elsewhere, particularly in Portugal.

There is a belief in Irish circles that to accept around Β£50bn in rescue aid.

But Ireland is resisting. Over the weekend Irish minister after minister insisted they had not asked for a bail-out and did not want one. One minister handed me a printed piece of paper which had at the bottom in bold type: "we can work through this ourselves".

The Irish position is that they don't need extra funding until the middle of next year. There will be a budget on 7 December, where further savings of Β£5bn will be made. The Irish government says that by December next year they will be two-thirds of the way to getting their budget down to 3% by 2014. That is the plan and they believe it is credible and workable.

The financial markets have doubts. They cannot see the growth or the tax receipts that will pare down Ireland's debt mountain. Many economists believe that sooner or later Ireland will have to appeal for help.

There is a political dimension to this of course. A bail-out would be a humiliation for a country that just a short while ago was the Celtic Tiger. Some see these days as critical for Irish fiscal independence. One politician said: "it's been a very hard-won sovereignty for this country and this government is not going to give over that sovereignty to anyone." The official line is that Ireland must show it can stand alone.

Yesterday in Brussels there was a high-level meeting involving Commission President Barroso and the Economics Commissioner, Olli Rehn. Gathering on a Sunday afternoon in the Berlaymont building this was in all but name an emergency meeting. On the agenda was one key question: was action needed before markets opened today.

So everyone will be watching the financial markets. Ireland will continue insisting it has a credible plan. Tomorrow in Brussels there is a European finance ministers' meeting and that could prove a crucial moment for Ireland.

On Friday there was some relief in the bond markets after a clarification from Germany that its wish to see private investors rather than taxpayers carry the burden of any bail-out would not apply until after 2013. Some investors had been dumping Irish bonds fearing they could suffer losses.

There is a wider dimension to this crisis. An announcement is expected today revealing that Greece's deficit figure is higher than declared and that . Greece has robustly embraced austerity measures but its tax receipts are down. It raises questions as to whether the medicine is working. Since May last year observers have been asking two questions: how will countries like Greece reduce their debts, when growth is being slowed by cuts and what position will Greece be in when its bail-out funds expire in 2013? The answers are not yet in. But the Greek government is already starting to lobby for the bail-out period to be extended.

Here is the wider difficulty for the eurozone periphery countries. They cannot devalue their currency or cut interest rates. They have few other tools in the box than to cut spending and slash wages. Yesterday in Ireland I met a civil servant who is already getting 70 euros (Β£60) less a week - a 13% cut. How much more austerity will voters take?

Although they are not in the majority there are voices in Ireland questioning why Ireland simply shouldn't restructure its debt, regardless of the consequences for its EU partners. Others are asking: is the potential bail-out about saving Ireland or the euro?

Another sense of the wider crisis came yesterday from Portugal, when its foreign minister said that a failure to adopt a coalition government in Lisbon to tackle its debt crisis could force the country out of the euro.

So the immediate focus is on Ireland, but the longer-term question is whether the medicine being administered - spending cuts and structural reforms - can rescue the eurozone.

UPDATE Official EU figures released today show that Greece has a significantly higher budget deficit and debt than previously revealed. Greece's deficit last year stood at 15.4% of GDP - higher than the figure of 13.6% given in April. Greece's overall debt figure for 2009 was revised up to 126.8% of GDP, from 115.1% previously.

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