LISBON, Portugal - November 23, 2010 - Europe's efforts to contain its debt crisis came under increasing strain Tuesday as bond market jitters spilled into Portugal and Spain, seen as the 16-nation eurozone's next weakest links now that Ireland has followed Greece by accepting a massive international rescue.

The Iberian countries' borrowing costs rose, suggesting investors are more worried about default, while Spain limited the size of a bond sale because traders demanded sharply higher premiums.

At the same time, Portugal's benchmark stock index slumped 1.8%, Spain's fell 2% and the euro slid below $1.34 for the first time in two months.

Spooked by the scale of Greece's bailout requirements in May and Ireland's banking failures, international investors are taking a closer look at the public finances of eurozone countries and they don't like what they're seeing, particularly in Portugal.

Traders are "looking for their next target" and Portugal fits the bill, said Emilie Gay, an analyst at Capital Economics in London. She predicts Portugal will have to ask for help by early next year, when it has to begin refinancing billions of euros (dollars) in government bonds. A bailout for Portugal would cost at least 50 billion euros, according to Capital Economics.

But European Union President Herman Van Rompuy insisted Portugal's finances are sound because the country's banks are well capitalized, they haven't had to cope with a severe housing market bubble, and the government has a strong adjustment program to bring down the deficit.

Asked during a visit to Stockholm whether the Irish bailout package was big enough and whether it can prevent the crisis spreading, Van Rompuy said, "There is no need for help in Portugal and of course the safety net is big enough to support Ireland."