Even as Greece and Italy appear to get their house in order, European leaders should prepare for the whole thing to blow up in their faces again in short order.

That’s the gist of confidential documents seen by European media members and reported with little attribution.

“Contagion may. . .re-emerge at very short notice, as demonstrated only a few days ago, and re-launch the potentially perverse triangle between sovereign, bank funding risk and growth,” said one, reported on by the Financial Times, following a report in Italian daily La Stampa.

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The focus now is Spain, where sovereign borrowing costs are soaring and home values collapsing in a slow-motion disaster that many pundits have for months predicted was unavoidable.

At issue now is a new austerity budget which Spanish political leaders hope will get the country ahead of its deepening problems. Spanish 10-year bonds trade at 5.26 percent, compared to 5.05 percent for Italian bonds and 2.4 percent on U.S. 10-year Treasurys.

In a televised speech, conservative party Prime Minister Mariano Rajoy promised Spain will stick to the new budget.

"If we continue on the path of reforms, Spain will come through this, Spain will be strengthened," Rajoy said in the speech, according to wire reports.

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