I could dramatise this situation by listing the emerging countries which have the same sovereign debt ratings and yield spreads as the European peripherals. But that is a rather painful exercise and I will dodge it on this occasion. By the way, it is worth recalling that, before the crisis, spreads on euro sovereigns were rather insensitive to the ratings. Not so today.
Market participants obviously want to protect themselves against the risk that they perceive, and the spreads are a consequence of this. But the spreads themselves feed back onto the condition of the issuers. Borrowing countries whose debt is trading at unaffordable spreads, because of perceived risk and market uncertainty, struggle to correct imbalances and hence can face a negative spiral of worsening creditworthiness.