With Greeks about to go to the polls again this year and Spain securing its bailout before they do, the lines are being drawn for what could be a make-or-break week for the euro zone.
At stake is not just the future of the 17-member currency bloc but also its trading partners throughout the Gulf, where analysts are already drawing up potential damage reports for contagion, such as the impact on oil prices and the availability of project financing.
"A marked spillover of the current crisis of peripheral euro countries into the core euro area and global financial markets could have major financial repercussions for the UAE and GCC region," the IMF warns in a report published this week.
The collapse of Lehman Brothers on September 15, 2008, shattered a theory prevalent at the time that Gulf economies had become decoupled from those of developed nations in the West.
More than US$100 billion (Dh367.32bn) has been lost from UAE markets alone since that time. Few in the region are about to underestimate a major foreign crisis again.
Financial markets in Europe will reopen this morning with much to digest. Spain, despite what the Madrid government might say, became the fourth country in the euro zone to seek financial aid over the weekend, requesting as much as €100 billion (Dh459.81bn) in loans to prop up its ailing banks.
Mariano Rajoy, the Spanish prime minister, had hoped to recapitalise lenders without external help, and had insisted that this was not a bailout for Spain, but a cash injection for its banks.
Yet a worsening recession in the country that is saddled with about €180bn of bad property loans forced a U-turn this week.
Parliamentary elections in France at the start of the week and in Greece at the end could be the key to determining whether the euro zone will survive its current crisis. The battleground of both is austerity - the wave of budget cuts that has swept across the continent as governments struggle to reverse the consequences of years of overborrowing.
In France, any move away from austerity measures would severely damage its relationship with Germany and could open up a fracture at the heart of Europe.
In Greece, the leader of the Syriza grouping of left-wing parties has already threatened to abandon the austerity pledges tied to the country's European Union and IMF bailout.
While Greece's exit from the euro zone is now more likely than not, according to analysts, there is less certainty over the financial fallout in the Gulf.
But the numbers are already being crunched by investors awaiting the outcome of the June 17 election in Greece that could set the scene for the country's exit from the common currency, should an anti-bailout coalition generate enough votes to form a government.
The cost of such an exit has been estimated at about €350bn for European public and private lenders. Banks would need to absorb some €62bn of this, according to the French investment bank Natixis.
But the financial impact becomes harder to measure beyond the borders of the euro zone. Indirectly, a Greek departure from the zone would almost certainly tip Europe into recession, which would reduce demand for exports from the UAE as well as the wider Gulf.
"The combination of a deep recession in the euro zone and the Arab world's own political turmoil will act as a drag on the region's economies in the near term," said Roger Bootle, the managing director of Capital Economics, in a note. "The North African countries are likely to be hurt most, given their heavy exposure to Europe and their poor domestic conditions - however the rest of the region will not escape unscathed."
An immediate consequence is likely to be a tightening of liquidity caused by European lenders pulling back to their home markets.
That could limit their ability to participate in funding projects worth hundreds of billions of dollars throughout the Gulf.
It would also mean GCC corporate borrowers would need to pay more for their funds, potentially affecting anything from car loans to mortgages.
Dubai may feel especially exposed as it seeks to recalibrate its economy away from property investment and towards trade and tourism.
In 2008, the emirate suffered a severe economic shock amid the financial crisis that was made much worse domestically by a home-grown property market bubble.
Since then, Dubai has moved towards a more export-focused economy based around trade and tourism.
A recession in Europe and a decline in the euro against the dollar would hit the very sectors of the economy that have been leading the Dubai rebound with hotel bookings from Europe likely to suffer.
The IMF says that while the likely level of financial spillover from the euro zone is on the rise - it is below levels seen during and after the Lehman-triggered crisis.
Neither is there a home-grown property bubble or overinflated stock market to magnify the impact of any external financial shock to the system.
That may provide some comfort for the Gulf in what is likely to be a tumultuous week in Europe.
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